Carter Hawley Junk Bonds Fall for Third Straight Day

The junk bonds of Carter Hawley Hale Stores plunged for the third day in a row Wednesday amid heightened concerns that the company will default on its debt.

Separately, Carter Hawley indicated that it is continuing in its talks with an unidentified party or parties to line up new financing. Late Tuesday, the Los Angeles-based retailer announced the collapse of two agreements that had been intended to shore up its finances.

One of those canceled deals was an agreement for General Electric Capital Corp. to buy Carter Hawley’s credit-card business. In a statement on the collapse of the agreement, GE Capital said: “On the basis of our due diligence examinations, we advised Carter Hawley Hale that we were not prepared to go ahead with the deal on the basis of the terms they had in mind.”

Later in the day, GE added, “In other words, we were not able to come to terms on the price.”

Bill Dombrowski, a Carter Hawley spokesman, concurred that the talks broke down over price. Dombrowski had taken issue with the initial GE statement, saying it suggested that GE had “pulled the plug.”

Meanwhile, on the New York Stock Exchange, Carter Hawley’s $350 million in junk bonds kept falling. Its 12.25% bonds maturing in 1996 closed at $158.75 per $1,000 of face value, down $141.25 from the day before. Carter Hawley’s 12.5% bonds due in 2002 closed at $130, down $91.25.

Carter Hawley’s stock closed unchanged at $1.875, its all-time low.

A bond analyst, Dorothy K. Lee of Moody’s Investors Service, said the possibility of a Chapter 11 bankruptcy filing by Carter Hawley “has increased tremendously.”

Lee added that “unless the company can pull some kind of miracle out of the hat,” Carter Hawley will be forced to renegotiate its debts in bankruptcy court. Meanwhile, she said, suppliers will refuse to ship merchandise to the stores out of fear that they will not be paid.

“There’s no way they can run their stores if they don’t get merchandise,” Lee added.

Carter Hawley has declined to comment on merchandise shipments.

Carter Hawley, parent of the Broadway-Southern California, is the biggest department store organization in the West. It also owns the Bay Area’s Emporium chain, Weinstocks in the Sacramento area and Phoenix-based Broadway Southwest.