Korvettes Inc., announced today that it had received permission from the French government to transfer $26 million from its French parent company to pay four of its major lenders.
The lenders -- Chase Manhattan Bank, Bankers Trust, Manufacturers Hanover Trust and the Prudential Insurance Co. -- claim the money was due last Friday and say they remain less than convinced by the Korvettes announcement.
Korvettes, the financially troubled discount chain, has had a strained relationship with its major creditors since the parent company, the Agache-Willot Group of France, killed an agreement worked out by Korvettes with its lenders.
After Korvettes' Chairman Joseph A. Ris resigned, the banks seized $6 million of the chain's deposits and put heavy pressures on the parent company. Agache-Willot quickly made peace with Ris, who promptly negotiated a new deal with the banks and the insurance company.
The new deal included more cash but did not stipulate a share in Korvettes' profits as had the earlier agreement. The banks and Prudential are due to receive $26 million now and another $2 million early next year. They are owed $55 million.
The banks were upset when Korvettes did not have the $26 million on hand to pay them last Friday, although Korvettes claims that the company was not supposed to have the money then.
Korvettes said today that, with the approval of the French government, the chain will have the money for its creditors by Friday or next Tuesday at the latest.
The banks remain wary and said that they could not preclude taking further action against Korvettes before next Tuesday.
Although the banks did not outline what action they might take, the lenders could declare the entire $55 million in default and offset some of the losses with the seized deposits then sue the chain for the rest. Suppliers of merchandise to Korvettes are also upset, although Agache-Willot has promised them that they will be paid in full in cash.
"That doesn't mean we will do anything," said one banker, "But we also remember some previous promises from Korvettes that were not kept."
The meeting that was scheduled for Wednesday between the chain's officials and its creditors has been canceled and rescheduled for next Tuesday.
One banker noted that in an age of electronic banking, the transfer of funds between France and the United States could be accomplished within minutes if the money is available in the account of Agache-Willot.