Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, April 25, 1990                   TAG: 9004250124
SECTION: BUSINESS                    PAGE: B5   EDITION: METRO 
SOURCE: the Hartford Courant
DATELINE: ROCKY HILL, CONN.                                LENGTH: Medium

AMES DEPARTMENT STORES INC. AND ITS CREDITORS

The Rocky Hill retailer, suffering from major losses and cash flow shortages because of its 1988 acquisition of the Zayre discount chain, has been trying for weeks to negotiate new financing with its bankers.

But Wall Street sources said that those discussions appear to have fallen apart, leaving Ames little choice but to file for protection from its creditors. Sources asked not to be identified because they feared jeopardizing their relationships with the company.

Although it was unclear this week exactly when, or in which state, the troubled company would file for bankruptcy court protection, financial and retail sources said that a number of signs indicate the move is possible within days. Among those:

Ames has hired Michael Cook, a bankruptcy specialist at a prominent New York law firm, to begin preparing the paperwork for a Chapter 11 filing, which would allow the company to continue to operate while trying to work out a plan to repay its debts.

Citibank, the lead bank in a group of 20 that has granted $900 million of credit to Ames, has hired Keen Realty Consultants of Long Island, N.Y., to begin evaluating the value of the leases Ames holds on its 680 discount department stores. Keen specializes in real estate consulting in bankruptcy cases.

Twenty institutions that own about $100 million of Ames' bonds have formed a committee, hired a financial adviser and proposed that they meet with the company's investment bankers to begin negotiating a repayment plan or debt restructuring.

Manufacturers, who began cutting off shipments of merchandise to Ames three weeks ago, continue to refuse to ship summer and fall goods to the company's stores because they fear they will not be paid.

Ames bought 392 Zayre discount stores in late 1988, planning to solve their problems and convert them to the format used to profitably run the Ames chain of stores. But retail analysts said that Ames made a number of mistakes in that effort, including changing the name and marketing strategy of the Zayre stores and alienating Zayre's traditional customers.