Ames files Chapter 11

August 20, 2001: 11:51 a.m. ET

Discount chain seeks court protection, obtains $755 in financing

NEW YORK (CNNfn) - Ames Department Stores Inc. filed for Chapter 11 bankruptcy protection, the company said Monday, as the regional discount chain struggles to stay afloat amid a slowing economy that has had a heavy impact on its customers.

Rocky Hill, Conn.-based Ames (AMES: down $0.02 to $0.69, Research, Estimates), which said last week it planned to shutter 47 under-performing stores, filed for bankruptcy protection in the Southern District of New York, saying it and its remaining 400 stores will remain open as the company restructures.

Trading of Ames stock was halted on the Nasdaq at 69 cents Monday following the announcement.

The news follows the demise of its competitors, Bradlees, Montgomery Ward and Caldor, all of which have shut their doors over the last three years.

A company filing for Chapter 11 seeks court protection from creditors until it comes up with a restructuring plan.

Under terms of the filing, Ames said it will continue to pay employees and reimburse its suppliers as normal

The company also said it had obtained two agreements for $755 million in debtor-in-possession financing to provide for its ongoing operations. The first loan is for $700 million from GE Capital. Ames also obtained a $55 million loan from Kimco Funding LLC.

"After considering all available options, and in light of today's difficult economic climate, we have concluded that reorganization is the best course for Ames," Chairman and CEO Joseph R. Ettore said.

Ames has been particularly hard hit by the slowing economy in which consumers have reduced spending and have drifted to discount chains such as Wal-Mart Stores Inc. (WMT: up $0.35 to $51.15, Research, Estimates), the world's biggest retailer, Target Corp. (TGT: up $0.11 to $36.73, Research, Estimates), Kohl's Inc. (KSS: up $1.17 to $57.81, Research, Estimates) and Kmart Inc., (KM: up $0.53 to $12.54, Research, Estimates), which have expanded into more localities where chains such as Ames once dominated, analysts have said.