Retailers Drawing On Revolvers, Prep For Dismal Holiday Sales
Retailers are entering their most profitable quarter of the year, and many have been forced to tap into revolving lines of credit to cover the costs of inventory and labor. Others are doing it as a preventative measure. The move is particularly worrisome for LBO-backed retailers, given the dismal projections for holiday sales. Add to that the poor performances of many PE retail plays, including the liquidation of Mervyns and Linens N' Things. Beyond that, there's predictions of massive defaults in the first quarter of next year. Not to mention, they're drawing down loans to finance a reduced inventory. Adding further insult to injury, the holiday shopping season is technically one week shorter this year, since Thanksgiving falls a week later than usual. At the top of the list is Blackstone and Bain-backed Michaels Stores, which on Wednesday drew down $120 million from its ABL revolver.
