April 22, 2009 / 11:49 AM / 9 years ago

UPDATE 2-West 49 warns of bank covenant woes, shares drop

* Says could be in default of bank covenant again

* Q4 profit drops 50 percent

* Shares drop 31.5 pct (Updates share price)

TORONTO, April 22 (Reuters) - West 49 Inc WXX.TO said on Wednesday that it was in violation of one of its bank covenants in its fourth quarter and warned that it may be in the same situation in the current quarter as well, sending its shares down more than 30 percent.

The trendy sporting goods retailer, which reported a 50 percent drop in profit in its fourth quarter, ended Jan. 31, said it negotiated a waiver for the default, which lowered the company’s maximum limit on its credit facility, reduced the seasonal increase available on its operating line and capped its term loan facility.

But it said it may be in violation of another covenant at the end of its current quarter.

But company Chief Financial Officer Rhonda Biddix, said the revised credit facilities, along with cash generated from operations, would be sufficient to fund its operations and capital expenditures during the year.

The company’s lightly traded shares, which have fallen about 59 percent in the past year, were down 31.5 percent at 25 Canadian cents, on volume of 3,000 shares. This was the first time the stock has traded since April 15.

Biddix also said during a conference call that it was working with its lender to negotiate new terms and expects to complete the talks in the second quarter, but at higher interest rates.

The company was not available for further comment.

The youth fashion retailer also said on Wednesday it earned C$1.1 million, or 2 Canadian cents a share for the quarter ended Jan. 31, down from C$2.2 million, or 4 Canadian cents a share, for the same period last year.

$1=$1.24 Canadian Reporting by Scott Anderson; editing by Peter Galloway

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