Jan. 23--Two of the seven Pennsylvania counties being asked to pledge $35 million in loan guarantees as part of a state package to aid Boscov's Inc. have passed, leaving state officials scrambling to ensure that the deal stays afloat.

On Nov. 20, Gov. Ed Rendell announced that the state had secured the loan to help the Exeter Township-based department-store chain as it emerged from Chapter 11 bankruptcy protection.

Seven counties, all of which have Boscov's stores and employees, were asked by the state to pledge future Community Development Block Grant funds as collateral for the loan. Those monies would be financed by federal Housing and Urban Development Section 108 economic-development funds.

The counties' loan guarantees would act as a backstop in the event that Boscov's was foreclosed, said Steve Weitzman, press secretary for the state Department of Community and Economic Development.

"The state has promised to hold the counties harmless -- make them whole," Weitzman said. "The reason why the state can do that is that it has an arrangement with Boscov's for unencumbered collateral; that the state would receive more than three times the value of the funds in money and property."

Five counties -- Lebanon, Schuylkill, Lackawanna, Blair and Cambria -- have agreed.

But Snyder County refused to approve it. And on Wednesday, the proposal in Butler County did not receive a second, not even proceeding to a vote of the county commissioners.

After Snyder refused, the five counties that approved the funds increased their portion to $5.8 million from $5 million.

Weitzman said state officials are planning to ask Snyder and Butler county officials to reconsider. He said they also are mulling other unspecified options.

"Bottom line, we still think this is going to work," he said.

Also, the cities of Scranton and Wilkes-Barre, and Vineland and Atlantic City, N.J., have agreed separately to provide $11.7 million in HUD money, Weitzman said.

Meanwhile, a number of regional banks, including National Penn Bank, Boyertown, and VIST Financial, Spring Township, agreed in late December to lend Boscov's the $35 million until the HUD funding comes through.

Weitzman said he believes misperceptions about the nature of the funding, and timing, are behind the two counties' failure to join the funding deal.

"This is not a bailout, although other people are using the word bailout," he said. "There's bailout fatigue. Several months or a year ago I don't think this wouldn't gotten as much attention. Now, there's a lot of talk about government intervention and what's the role of the government."

Boscov's filed for bankruptcy protection on Aug. 4 and emerged on Dec. 4, with the Boscov, Lakin and Holzman families purchasing its assets.

Boscov's Chairman Albert R. Boscov could not be reached for comment Thursday.

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