The Talbots Inc commented on its Form 8-K filed on April 15, 2008 regarding the Company's credit facilities, to clarify that recent arrangements with its major vendors, along with currently available working capital lines, are expected to be sufficient to fund Talbots working capital needs under its 2008 operating plan.
As reported in the Form 8-K, the Company's major vendors, which represent approximately 75% of Talbots offshore merchandise purchases, have agreed to “open account” terms with payment in 45 days.
The revised terms extend the settlement period to 45 days from approximately 22 days on letter of credit purchases, which the Company expects will effectively add approximately $40 million to the Company's 2008 operating cash flow.
Due to the revised payment terms with its major vendors, the Company believes that its financing needs with respect to the remaining smaller vendors, representing a minority of its purchases, have been substantially reduced and can be accommodated with a letter of credit line of approximately $50 million.
In recent years the Company had letter of credit facilities aggregating approximately $300 million; however, by going to “open account” for the majority of merchandise purchases, the need for credit should significantly decrease.
The Company believes that approximately $50 million will be sufficient to satisfy the financing needs in purchasing from its smaller vendors.
Talbots is in discussion with several financial institutions to supply the $50 million letter of credit and expects resolution of these discussions in the next few weeks.
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