Dart Drug Stores Inc. of Landover, which is operating stores under the Fantle's name, failed to keep promises with a major bank creditor concerning its financial performance, according to statements released yesterday by the company.
While Dart officials declined to comment on the degree to which the company failed to meet the requirements of a $30 million financing package from Mellon Bank, they said it did not mean the company's survival was immediately threatened since the bank waived certain aspects of the loan agreement.
Dart, operating under bankruptcy law protection, runs a chain of 65 Fantle's drugstores in the District of Columbia, Maryland, and Virginia.
The disclosures about the drug store chain's financial performance were contained in Dart's quarterly financial report with the Securities and Exchange Commission. Noted in the filing by Dart, which filed for protection under Chapter 11 of the federal bankruptcy code in August 1989, was the failure of the company to meet limits for maximum monthly cash losses and minimum quarterly cash flows in February and March. Under the terms of its loan agreement, Dart cannot lose more than $250,000 a month and must have positive cash flow of at least $1 per quarter.
"When actually operating in Chapter 11, some of the constraints put on us by banks are a little more onerous than you would like to have, and it's not unusual that they can't be met," said Dart Chairman Sheldon W. Fantle. "But it's not something that is going to be debilitating."
Louis Zircher, a senior vice president for Pittsburgh-based Mellon, declined to comment on the loan provisions that were violated by Dart and did not indicate whether the bank would continue to waive them.
Mellon extended credit in September to Dart, which put up some of its store leases as collateral. The company has borrowed $23.5 million under the loan agreement thus far.