Hurtin' Retailers and Other Financially Challenged U.S. Companies for April 18

The items below are taken from the Credit Manager's Weekly Summary of Financially Challenged Companies. A full issue contains information on more than 200 companies. Please visit the insideARM bookstore for information on subscribing to the Summary.

Bear Stearns Cos., Manhattan, N.Y., reported its first quarter net income plunged 79%–to $110 million, while revenue dropped 40%–to $1.5 billion. Profits fell short of expectations although revenue was ahead of forecasts. Also, the Securities and Exchange Commission informed the investment firm that it could face civil charges for alleged anticompetitive practices in its municipal securities bidding. Bear Stearns, which is facing a sharp drop in the number of its trading partners, warned that it may be forced to file for bankruptcy protection if its deal to be acquired by JPMorgan doesn’t go through.

Blockbuster Inc.’s shares took a drubbing on Wall Street after the Dallas -based chain of video-rental stores announced that it had offered more than $1 billion in cash to acquire Circuit City Stores Inc. While news of the offer pumped up Circuit City’s shares, which surged 27%, investors and analysts are wondering what Blockbuster could be up to in trying to absorb the ailing Richmond, Va. electronics retailer. For one, an acquisition would only inflate Blockbuster’s existing $760 million in debt. And, despite assurances from Blockbuster investor Carl Icahn, Circuit City responded by saying that it doubts Blockbuster would be able to arrange financing for the deal. In the end, perhaps Blockbuster’s bid for Circuit City is a desperate attempt to expand beyond the movie-rental market, which some believe is in the process of dying.

Capco Energy Inc., an onshore and offshore oil and gas exploration company, filed Chapter 11. The filing, in the U.S. Bankruptcy Court for the Southern District of Texas, is under case number 08-32282. Capco, which operates more than 250 wells in Texas, Oklahoma and the Gulf of Mexico, recently said that it faces $22 million in debt.

Celebrate Express Inc., a Kirkland, Wa. seller of party products, reported a third quarter loss of $13 million, compared to a $137,000 loss in the year-earlier period. The recent results included an income-tax-expense charge of $8.2 million. Sales for the quarter declined to $13.3 million, down from $16.7 million a year ago. Further, Celebrate’s executives are pessimistic about the firm’s chances of ending the year in the black. Earlier, they said they would look into the possibility of putting Celebrate up for sale.

Devcon International Corp., a Boca Raton, Fl. provider of electronic security services, got a warning from Nasdaq that its stock could be delisted because of failing to maintain minimum shareholders’ equity requirements. The company has until 4/21 to present a plan for regaining compliance. Last year Devcon lost $23.7 million, primarily because of its merger a year ago with Guardian International.

FGIC, an unprofitable bond insurer, is looking for investors to help it strengthen its capital base and raise money for a new triple-A guarantor that would back up public finance securities. FGIC, owned by Blackstone Group and PMI Group, recently reported a net loss in its fourth quarter of $1.9 billion.

Linens 'n Things Inc., a Clifton, N.J. seller of household goods, said it will defer a $16.1 million interest payment that’s due this week, as it negotiates with debtholders about a capital restructuring. The retailer, with almost 590 stores as of the end of last year, has been the subject of bankruptcy talk as it continues getting battered by the weak housing market and increasing debt. Linens ‘n Things, which lost $62 million in its fourth quarter, was purchased two years ago for $1.3 billion by private-equity firm Apollo Management LP.

Macy’s Inc. got a thumbs down from Fitch Ratings, which downgraded the Cincinnati, Oh. department-store operator’s ratings from BBB to BBB-, a single notch above junk status, citing the weak U.S. retail environment.

Modtech Holdings Inc., a Perris, Calif., maker of modular classrooms, reported a fiscal net loss of $56.9 million, including a $38.3 million impairment charge. Revenue sank 44%–to $87.3 million.

Pep Boys-Manny, Moe & Jack, the Philadelphia, Pa.-based retailer of auto parts, wrapped up a sale-leaseback deal on twenty-three properties, bringing in $74.3 million, which it will use to pay down debt.

Phoenix Footwear Inc., Carlsbad, Calif., reported a fiscal net loss of $1.3 million. Revenue declined 5%–to $82.9 million.

Stanley Furniture Co. Inc., Stanleytown, Va., reported its first quarter net income declined 37%–to almost $1.1 million. Sales fell 17%–to $62.5 million.