Deceit Denied in Federated-Allied Moves
Federated-Allied department store executives told creditors Thursday that the companies didn’t deceive them about the financial crisis that precipitated the biggest bankruptcy filing in retailing history.
But the executives said they doubted that all of the $7.7 billion in debt listed in their bankruptcy filings would be fully repaid.
Much of the debt resulted from the junk bond-financed takeovers of Federated Department Stores Inc. and Allied Stores Corp. last decade by the Campeau Corp. of Canada, a real estate developer.
G. William Miller, chairman of the newly formed parent company Federated Stores Inc., and the top executives of the two retailers, which operate 260 stores in 28 states, spoke to creditors and reporters at a special meeting.
They sought to reassure creditors about the ultimate repayment of the debt but were cautious.
“Some of it will have to disappear,” Miller said. “For those who hold the debt, the market is no longer there. We want them to get a reasonable recovery.”
Miller, Federated-Allied Chairman Allen I. Questrom and President James Zimmerman read prepared statements and did not answer questions.
Zimmerman told the creditors that by September, 1989, it was evident to senior managers that Federated and Allied could not meet their debt payments and that major financial restructuring was necessary.
But he said the decision to file for bankruptcy court protection was made in January to prevent further erosion in the value of the businesses.
“There was no plot to deceive any creditors. There was no grand scheme in Toronto or elsewhere to trick anybody,” Zimmerman said.
“We regret that any of our creditors were left holding the bag with checks that did not clear prior to our filing.
“It is my personal goal--as well as our corporate expectations--that the reorganization plan to be developed will maximize the return to all creditors.
“I hope that all of our trade creditors will be paid in full, and we anticipate working with all of our creditors toward that objective.”
Zimmerman pledged to creditors: “You will find us to be open, honest and straightforward.”
Miller, a former U.S. secretary of the Treasury, said he assumed leadership last month of the parent company, Campeau (U.S.), on condition that it be renamed and assured autonomy, distancing itself from Robert Campeau, the Canadian real estate developer who engineered the debt-financed takeovers of Allied and Federated.
