Investors Seek Big Carter Hawley Slice : Bankruptcy: Zell/Chilmark Fund is pushing for as much as 90% of Broadway’s parent company in exchange for up to $270 million in financial aid.

The Chicago partnership offering to invest up to $270 million in Carter Hawley Hale Stores is pushing for a stake of as much as 90% of the retailer in exchange for the financial aid, one of the heads of the investment group said Thursday.

But Sam Zell, co-founder of the Zell/Chilmark Fund, said he would expect to retain Carter Hawley’s current top management if his partnership’s offer succeeds.

The 49-year-old businessman, known on Wall Street as the “Grave Dancer” for his acquisitions of troubled firms, called the offer he unveiled Wednesday for Los Angeles-based Carter Hawley “a financial investment.”

“I don’t view this as a precursor to changing management,” Zell said. “The management that’s there has the ability to do what needs to be done, and I think they’ll do it.”

Zell/Chilmark, a “vulture fund” endowed with $1 billion to invest in ailing firms, is offering to help pull Carter Hawley out of Chapter 11 bankruptcy quickly by spending $220 million to pay off most of its creditors.

It also would lend Carter Hawley $50 million to remodel its stores, some of which have gone years without a face lift. Carter Hawley, the biggest department store organization in the West, is parent of Southern California’s Broadway chain.

Zell defended Carter Hawley management in the face of widespread criticism of Chairman Philip M. Hawley and other senior executives. According to the Value Line Investment Survey, Carter Hawley’s profits have lagged the retailing industry average every year since 1975.

Zell conceded that the company’s performance has been weak for years but attributed the problems to the company’s lack of capital for modernizing its stores. He said Carter Hawley still is “a terrific franchise” with excellent locations.

“With the right capital structure, it can regain its preeminence,” Zell said.

Although investors and creditors are enthusiastic about the Zell/Chilmark offer, observers indicated that the fund will be hard-pressed to gain the full stake in Carter Hawley that it wants. According to an offering document released Thursday, a reorganization proposal discussed recently would give Zell/Chilmark and any unsecured creditors that don’t accept its offer 80% to 90% of the post-bankruptcy company.

But both sides said they are far from a deal. “They have their views, we have our views, and there is no agreement,” said Jeffrey Chanin, the investment banker representing Carter Hawley.

“No one who knows Sam Zell and David Schulte (Zell’s partner) believes this is the final offer,” said Peter J. Solomon, a New York investment banker specializing in retail companies.

“First offers are rarely last offers.”

In addition, such an agreement would wipe out most of the 45% stake Carter Hawley’s employees have through a savings program. Observers said Carter Hawley’s bankruptcy judge, James Dooley, might balk at approving a deal that hits employees that hard.

Zell said that he was “sensitive” to employees’ concerns and that he intended to devise a way for employees “to participate” in the future growth of the company.

Meanwhile, the creditors committe in Carter Hawley’s bankruptcy case began maneuvering to extract a higher offer. The panel announced that it formed a subcommittee to review the Zell/Chilmark bid and “to establish a process for reviewing any competing offers.”

“The Zell/Chilmark tender offer is scheduled to remain open until at least Sept. 5, and a lot can happen between now and then,” said Jeffrey Werbalowsky, the investment banker for the creditors.

Werbalowsky said the subcommittee would meet soon, possibly today, to consider how aggressively it should solicit other offers. He declined to say whether his committee had received any overtures from other potential bidders.

On Wall Street, the prices of Carter Hawley’s junk bonds hovered above $40 per $100 of face value in light trading, apparently reflecting some hopes of a higher buyout bid. The Zell/Chilmark offer would pay 40 cents on the dollar to satisfy the bankruptcy court claims of junk bondholders and suppliers against Carter Hawley. In response, bond prices have roughly doubled.

Carter Hawley’s stock was the second-biggest percentage gainer on the New York Stock Exchange on Thursday, climbing 37.5 cents to close at $2. On Wednesday, it also rose 37.5 cents.