Carter Hawley to Receive $150 Million in Financing : Retailing: The bankruptcy court’s approval of the bank loan will allow the chain to resupply its merchandise.
Carter Hawley Hale Stores won bankruptcy court approval Wednesday to receive $150 million in bank financing, clearing the way for the company to resume ordering merchandise for its stores.
The money is the first part of an $800-million loan agreement that Carter Hawley secured from New York-based Chemical Bank to finance its reorganization under Chapter 11 of the U.S. Bankruptcy Code. Carter Hawley, parent of the Broadway-Southern California and the biggest department store company in the West, sought bankruptcy court protection from creditors Monday.
U.S. Bankruptcy Judge James R. Dooley approved the interim financing request, as expected, accepting the company’s arguments that it needed the money immediately.
Robert A. Greenfield, a bankruptcy lawyer representing Carter Hawley, said the $150 million was necessary to end the “uncertainty” about the company’s finances among its suppliers. Carter Hawley, which has struggled under $1.3 billion in debt, has said its bankruptcy filing was triggered by an abrupt withdrawal of credit last month by skittish suppliers and lenders.
“What will we do if we don’t get this loan? We’ll be out of business,” Greenfield said.
He presented his arguments in a downtown Los Angeles courtroom that was packed with lawyers representing some of Carter Hawley’s 93,000 creditors. Also looking on were Carter Hawley Chairman Philip M. Hawley, accompanied by a platoon of public relations and bankruptcy specialists.
The financing was approved despite the objections of lawyers for Newark, N.J.-based Prudential Insurance Co. of America and San Francisco-based Bank of America, which as real estate lenders to Carter Hawley are the company’s two biggest secured creditors. Prudential and Bank of America lawyers argued that, among other things, the loan agreement would give Chemical Bank too much power over Carter Hawley.
“They’re giving away the store to get financing,” said Lawrence Peitzman, a lawyer for Bank of America.
Greenfield countered that Carter Hawley negotiated the best loan deal possible. Separately, he said that Carter Hawley will pay $5 million in fees to Chemical, in addition to interest, for the $250 million in working capital financing.
Judge Dooley also approved a motion allowing Carter Hawley to continue its employee benefits under Chapter 11. On Monday, he approved orders allowing the company’s stores to continue conducting business as usual with its customers. That was intended to make sure that customers could do such things as return merchandise and receive full credit for deposits made before the Chapter 11 filing.
In trading on the New York Stock Exchange, Carter Hawley’s stock rose 25 cents, from its all-time low, to close at $1.375.
A hearing was set for Feb. 28 for Dooley to consider an additional $100 million in bank financing for Carter Hawley. Unsecured creditors, including suppliers, will meet next Wednesday to form one or more committees to represent their interests.
In a news release, Hawley said after the hearing that “we look forward to working with our vendors to rebuild Carter Hawley Hale as a viable and strong retailing company. A successful Carter Hawley Hale is in both our best interests and those of the vendor community.”
Carter Hawley owns 88 stores. Along with the Broadway-Southern California, its divisions are the Bay Area’s Emporium chain, Weinstocks in the Sacramento area and Phoenix-based Broadway-Southwest.
