With its financial picture improving, Gottschalks refinanced its $165 million revolver and was able to get relaxed terms and covenants. The department store chain initiated a financing agreement with GE Capital in February 2002. "At that particular time, Gottschalks was basically coming through a tough financial period," noted J. Gregory Ambro, cfo. "We had acquired a chain of stores called Lamonts and we were digesting those stores. We ended up closing approximately 15. Over the past two years, we've had more challenges financially than in the past."
The company started renegotiating the credit agreement in the early part of 2003. "We have gotten past some of the rough assimilation trials that we went through with Lamont and our financial picture was looking better and interest rates are more favorable now," Ambro said. "Since we had a good relationship with GE and the other syndicate members, we decided to enter into a new agreement, which extends through February 2007." The new facility relaxes some terms and covenants to provide for more flexibility on a month-to-month-basis, Ambro noted. He declined comment on the pricing terms but said, "We were able to moderately reduce pricing because of the interest-rate climate and our financial position. Hopefully, we're viewed by [the investors] as being a little bit less of a risk."
CIT Group Business Credit, LaSalle Retail Finance and Wells Fargo Foothill make up the syndicate. Ambro said investor reaction was positive. "I think they can see that our financial position is improving," he said. "We also managed to sell our credit card portfolio last year to Household International and in doing so it provided more flexibility under our loan agreement. We no longer carry those receivables, someone else does." Ambro said GE has been supportive of the company's business plans. "If you are always fighting with your financer on everything you want to do, it's not fun," he said.