By Brad Dorfman

CHICAGO (Reuters) - Talbots Inc (TLB.N: Quote, Profile, Research) shares plunged as much as 33 percent on Wednesday after the women's apparel retailer disclosed that two major banks would no longer make letters of credit available to the company.

But Talbots said arrangements with its major vendors, as well as available working capital lines, should provide enough funds for its working capital needs this fiscal year.

Talbots had used the letters to finance importation of merchandise.

"We have an alternate plan in place, and have revised most of our vendor relationships to maximize the company's financial flexibility and greatly reduce our need for letters of credit," Chief Executive Trudy Sullivan said in a statement.

The retailer, which has been hit by losses amid falling sales in a weak women's apparel market, said on Tuesday Hongkong Shanghai Banking Corp (HSBA.L: Quote, Profile, Research) would ratchet down the letter-of-credit facility limit for the company, ending the facility altogether on Aug. 8.

Talbots also said in a regulatory filing that Bank of America (BAC.N: Quote, Profile, Research) informed it on April 7 that it would not provide a new credit agreement to replace one that had expired on Feb. 23, and it would no longer honor new drawings made under the previous credit facility. Bank of America had previously allowed Talbots to use letters of credit under terms of the expired agreement.

Talbots, which is majority owned by Japanese retailer Aeon Co Ltd (8267.T: Quote, Profile, Research), said Wednesday that it recently negotiated "open account" payment terms with vendors that account for 75 percent of the company's overseas merchandise purchases and that it will also pursue new letter-of-credit agreements with other lenders.

Open-account terms allow a retailer a certain amount of time to pay a vendor for merchandise the retailer receives.