Carter Hawley Tries to Soothe Suppliers’ Fears

In the wake of filing for bankruptcy court protection, Carter Hawley Hale Stores moved quickly Tuesday to mend relations with suppliers as company officials began efforts to turn around the West’s largest department store company.

Carter Hawley Chairman Philip M. Hawley and President H. Michael Hecht flew to San Francisco to talk to manufacturers in an effort to ease their concerns and persuade them to resume shipments. In coming days, they plan to meet with suppliers in Los Angeles, New York and other parts of the country.

Suppliers have long expressed frustration with slow payments by Carter Hawley, and cutbacks in their shipments in recent months led to Carter Hawley’s Chapter 11 bankruptcy filing on Monday. Industry analysts, however, said they expect suppliers to resume shipments shortly now that the company has a commitment from Chemical Bank for $800 million in financing.

“They recognize that this is a new leaf for Carter Hawley,” said Walter Loeb, a New York retail consultant.

Investors, however, still appear to be nervous. In composite trading on the New York Stock Exchange Tuesday, Carter Hawley closed at a new low, $1.125, down 50 cents. The NYSE said it is reviewing whether Carter Hawley should still be listed on the exchange.

Los Angeles-based Carter Hawley, which owns the Broadway-Southern California, said it intends to emerge from bankruptcy proceedings intact. But industry officials said the company will come under increasing pressure this year from creditors to raise cash by selling off major assets.

Holders of Carter Hawley’s $350 million in junk bonds, on which interest is no longer being paid, “would want to get cash out of the deal and would be in favor of selling things so they can get their money back,” said Nicholas Gallopo, who heads the retailing consulting practice in the New York office of Arthur Andersen & Co.

On the other hand, he said, “managers want to keep it together, keep it viable and keep their jobs.”

Carter Hawley is expected to make its best case for keeping the company together in a reorganization plan it must file with the U. S. Bankruptcy Court. The official deadline is 120 days from the bankruptcy filing, but the court often extends that period in major cases.

The firm’s executives said now that the company has fresh financing from Chemical Bank, it can continue with store remodelings that will attract new customers and boost its business. In addition, they said, the company’s earnings will be improved by recent cost-cutting efforts. As a result, Carter Hawley executives said, the company should be able to rebound from Chapter 11 without selling off assets.

Selling assets “is not what the company needed to maximize its values,” said Hawley, explaining why the company filed for Chapter 11 protection from creditors on Monday. “What it needed was credit availability again.”

Kurt Barnard, publisher of the newsletter Retail Marketing Report, said if Hawley comes up with an attractive reorganization plan to revive the company’s faltering business, creditors are likely to give him the time to try it. But, he added, if the plan offers no fresh ideas for the company, and “if it’s going to be more of the same, then Phil Hawley is finished.”

If a good offer comes forward for one or more of the company’s divisions, one investment banker said, many creditors will be inclined to accept it. Among potential buyers for Carter Hawley assets is the Fresno-based Gottschalks department store chain, which has expressed interest in the Weinstocks stores in the Sacramento area and Broadway stores in Bakersfield and Salinas.

Joe Levy, Gottschalks’ chairman, said it would have been easier to buy Carter Hawley assets if the company stayed out of Chapter 11, but “I’m not discouraged. It’ll take time, but we hope we’ll get a shot” at buying some Carter Hawley stores.

Wall Street sources also said that St. Louis-based May Department Stores, owner of May Co. California and Robinson’s stores in the Southland, has previously considered trying to buy Sacramento-based Weinstocks and the Bay Area’s Emporium chain.

But Dillard Department Stores, which Wall Street sources said had expressed interest in buying the Broadway-Southern California chain and perhaps all of Carter Hawley, now appears to have dropped the idea. Officials of the Little Rock, Ark.-based company have declined to comment.