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UPDATE 2-Loehmann's says fulfilling financial obligations
* Loehmann's says did not miss debt interest payment
* NY Post says suppliers are holding back shipments
* CIT suspended factoring approvals - source (Adds source on CIT factoring approval, company comments)
By Chelsea Emery
NEW YORK, April 6 (Reuters) - Off-price clothing chain Loehmann's said on Tuesday it was fulfilling its financial obligations in response to new questions about its ability to keep its operations afloat.
Loehmann's, owned by Dubai investment group Istithmar, denied a report in the New York Post on Tuesday that it had missed a $6 million interest payment on its debt last week. But a source briefed on the situation said the store chain had delayed payments to CIT in order to make the interest payment.
In its story, the Post, citing sources close to the situation, also said suppliers to the company were holding back shipments due to its deteriorating financial situation.
"The premise of today's New York Post story is patently untrue. Loehmann's has fulfilled its financial obligations to its business partners and specifically, has made its debt interest payment on time, as scheduled," Loehmann's Chief Executive Jerry Politzer said in a statement.
Loehmann's is one of many apparel retailers that has struggled amid a downturn in consumer spending linked to high U.S. unemployment. The company, which operates more than 60 stores, also competes with larger chains focused on selling designer fashion at steep discount, including TJX Companies Inc (TJX.N).
A source told Reuters that CIT Group Inc (CIT.N), which provides financing to small and mid-sized businesses, had suspended its factoring approvals for Loehmann's because the company had slowed payments to vendors and to CIT due to the interest payment.
"Loehmann's has been a difficult credit for some time," this source said, though the person noted that "major suppliers" are supporting the company with goods.
It was not immediately clear if CIT had reinstated its factoring approval.
CIT spokesman Curtis Ritter said, "Our customer credit decisions are confidential and we do not comment on them."
In an email, a Loehmann's spokeswoman said the company keeps its relationship with factors confidential.
"However, it is important to note that we maintain open communication with all of our 'factors,'" spokeswoman Mara Kelly said. "In regard to Loehmann's vendors, although our specific relationships are also confidential, as with our factors, we have found them very supportive of our business."
Istithmar is the overseas investment arm of Dubai World. In addition to Loehmann's, it has been trying to shore up the business of luxury department store Barneys New York and has defaulted on payments for prime New York properties.
An Istithmar spokeswoman declined to comment.
Credit rating agency Standard & Poor's has given Loehmann's a speculative-grade "CC" corporate credit rating, saying in March that "we believe that current cash on hand and availability under the company's revolver may not be sufficient to cover operating needs over the near term." (Reporting by Chelsea Emery; Additional reporting by Dhanya Skariachan; Editing by Derek Caney, Dave Zimmerman and Richard Chang)
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