American Banker and Bloomberg News

CHERRY HILL, N.J. — A host of troubled companies could threaten credit quality at U.S. banking companies.

Vlasic Foods International Inc. filed for bankruptcy Monday. The original lenders in a $550 million loan package arranged when Campbell Soup Co. spun off Vlasic on March 30, 1998, include what are now J.P. Morgan Chase & Co., Bank of America Corp., Bank One Corp., FleetBoston Financial, Mellon Financial, PNC Financial Services Group, and Wachovia Corp., according to documents filed with the Securities and Exchange Commission. Some of these banks may have sold a portion of their positions since.

Xerox Corp. on Monday announced plans to cut 4,000 jobs in the first quarter. The Stamford, Conn. copier company said the move was in response to fourth-quarter losses.

Meanwhile Sunbeam Corp., another problem corporation to which several banks have exposure, has warned that the New York Stock Exchange might de-list its stock because the company is failing to meet requirements for minimum market capitalization, shareholder equity, and average closing share price.

And Polaroid Corp. announced it is selling real estate and cutting costs to retire debt. The company is likely to violate its bank agreements this quarter unless it sells assets soon, an analyst said.

Gibboney Huske, an analyst with Credit Suisse First Boston, said Polaroid, with $937 million of debt, has drawn $335 million on a $350 million credit line. The company’s lending agreement calls for earnings before interest, taxes, depreciation, and amortization to be three times the company’s interest expenses.

“We are working with our banks,” Polaroid chief financial officer Carl Lueders said. “We have confidence that we’ll be able to remain within our bank agreements.”

Polaroid is trying to become profitable again by selling digital cameras, printers, and instant cameras aimed at the youth market.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.