Montgomery Ward Cuts Jobs
As Talks With HFS Continue
By a WALL STREET JOURNAL Staff Reporter
CHICAGO -- Montgomery Ward Holding Corp. said it eliminated 400 of
its 1,800 corporate jobs and added that its negotiations to sell its
direct-marketing division are moving forward.
The company, which owns the money-losing Montgomery Ward & Co.
retailer, said the cuts were made as part of the plan it is developing to stem
the losses and turn around the retail business.
Montgomery Ward Holding is 50% owned by GE Capital Services, which
in recent months has extended financial help to the retailer to help keep it
afloat. Montgomery Ward is in negotiations with its banks to relax
covenants that could put the company in default on $1.3 billion in debt.
A person close to the situation said GE Capital, a division of General
Electric Co., has agreed to pour more money into Montgomery Ward
Holding on a secured basis in an effort to get the banks to agree to suspend
the covenants. That could help Montgomery Ward Holding develop a
recapitalization plan with the banks that would offer the retailer longer-term
relief.
HFS Inc. is in discussions to buy Montgomery Ward Holding's profitable
direct-marketing business, the Signature Group. Just last month, HFS,
owner of such well-known brands as Days Inn, Avis rental cars and
Century 21 real estate, agreed to merge with direct marketer CUC
International Inc. in a stock swap valued at $10.9 billion.
The purchase of Signature, which offers services such as accidental death
insurance and auto-service clubs, would dovetail with the CUC
transaction, making HFS by far the largest player in the direct-marketing
business.
The person close to the situation said HFS is waiting for Montgomery
Ward Holding to reach an agreement on the waivers with its banks. HFS
could then announce a preliminary agreement to buy Signature, contingent
on Montgomery Ward getting new financing from the banks. |
