Zenith Electronics Says It Must Renegotiate Credit

CHICAGO — Zenith Electronics Corp., the last U.S.-based television maker, warned Wednesday of potentially “serious liquidity problems” that will require it to renegotiate its bank credit.

In a filing with the Securities and Exchange Commission, Zenith said it is in talks with Bank of New York to relax a credit agreement requirement that it maintain a net worth of $229 million at the end of every quarter.

“If the discussions do not result in the covenant being modified, the company is expected to be out of compliance with the credit agreement beginning as of the date fourth-quarter results are reported” in February, Zenith said.

A company spokesman said Zenith is considering “a full range of financing, strategic or other contingency plans.”

Asked whether bankruptcy was among them, the spokesman declined to comment and said more details would be reported “when the time is appropriate to disclose them.”

Analyst Dennis Moran of A. G. Edwards & Sons Inc. downgraded Zenith’s stock to a hold from a buy and said he would recommend that investors sell unless Zenith obtains “intermediate financing” within 30 days.

“By intermediate financing we generally mean the sale of a major asset or securing an investment partner,” Moran said.

Zenith stock fell $1.125, or 17%, to close at $5.625 on the New York Stock Exchange.

Last month Zenith posted a larger than expected loss of $41.8 million for the third quarter, and the company has said it expects a loss for the full year, in part because of television price cuts by its competitors.

Moran said he expects Zenith to return to profitability next year, “depending on an improved consumer economy and the company getting additional and permanent working capital.”

Zenith also said last month that it would eliminate about 15% of its 2,600 U.S. salaried workers and would cut its Mexican work force by an unspecified amount.

Zenith, based in Glenview, Ill., assembles many of its televisions in Mexico.

On Aug. 12, Zenith proposed a public offering of 8 million shares of common stock, but the company withdrew the offer after it and its investment bankers reviewed the impact of third-quarter results, market conditions, October television price reductions and near-term business prospects.

In addition to televisions, Zenith, with 1991 sales of $1.32 billion, makes or sells picture tubes, computer monitors, videocassette recorders and camcorders.

The company is also involved in a high-stakes competition to develop a standard for high-definition television, or HDTV, a new technology that will produce movie-quality images for a variety of business and consumer applications.

The Federal Communications Commission is expected to choose next year between the standard developed by Zenith and those of several rivals.