Ames Department Stores officials, struggling to revive the ailing discount retail chain, say a new $250 million loan agreement is the first step toward restoring confidence in the company. ``This is what it's going to take to start this company on the road to recovery,'' said Michael Cook, the lead attorney representing Ames in hearings in U.S. Bankruptcy Court, where the credit was approved Tuesday. Ames also said it had cut the number of store closings planned immediately from 74 to 33, but said it still is reviewing its operations and could close more stores later. The nation's fourth-largest retailer filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code on April 25 after many suppliers who had not been paid for earlier deliveries stopped shipping merchandise. The company also was unable to get a new credit agreement from its lenders to ease a cash flow crunch. Officials said the new $250 million line of credit will allow the company to pay vendors on time and keep merchandise coming into its 680 stores. ``I believe it was what we needed to hear to give the trade (vendors) the security to feel free to ship us the goods we need,'' said Ames President George Granoff. The agreement approved by U.S. Bankruptcy Court Judge Howard C. Buschman III allows Ames to borrow up to $250 million from Chemical Bank. Buschman authorized the financing after a group of 33 banks withdrew its objection to the plan. In his order, the judge said Ames did not have sufficient working capital to finance its operations. ``Absent such availability, the debtors cannot supply their retail stores with the inventory they need in order to ensure adequate sales levels and continued customer loyalty,'' Buschman said. Stephen L. Pistner, Ames' new chief executive officer, confidently predicted the company would make a comeback with the new financing. ``If we want to save this company, it takes money and competent business. I know how to do the rest,'' Pistner said. Buschman postponed a final hearing on Pistner's appointment as CEO until May 24. Creditors had asked for more time to review terms of his contract, which could pay him up to $8 million in salary, bonuses and benefits over three years. A bank group headed by New York's Citibank withdrew its objection to the $250 million loan after reaching an agreement with Ames early Tuesday. Ronald DeKoven, an attorney for the banks, said the agreement allows the banks to split with the company $91 million in cash collateral Ames has in its account. He said the agreement also resolves a dispute between Ames and the bankers over outstanding letters of credit totaling $65 million. Ames owes the Citibank group about $450 million. The banks had objected to Ames' request to borrow the further $250 million because Chemical's loan would have a higher repayment priority than the Citibank group's debt. Antonio Alvarez, a principal in a New York consulting firm that helped Ames negotiate the loan with Chemical, told the judge that the company has been unable to convince vendors to ship goods. He said if the trend continued, the company could see sales drop 40 percent or more. The court earlier had approved $25 million in credit from Chemical Bank. Ames, which claims it has been losing more than $10 million a week, said it needed the additional $225 million to pay vendors and assure the company of merchandise for the critical back-to-school and Christmas sale seasons. ``The company has literally been bleeding to death,'' said Cook. An attorney representing a committee of Ames creditors said the group was satisfied with the new financing arrangement. ``Our committee did want this approved, because the company needs the money to keep operating,'' said the attorney, John M. Friedman Jr. ``I think this will be a big help in getting back to a sense of normalcy with the vendors.'' Also Tuesday, Ames said it lost $228 million, or $6.41 a share, in the year that ended Jan. 27. The loss, which the company predicted last month, compared with earnings of $42 million, or $1.07 a share, in 1989.
