Carter Hawley Creditors Reach Accord: Sources : Retailing: An investment group apparently boosted its previous bid for the West’s largest department store company.

The investment fund seeking to take control of Carter Hawley Hale Stores has reached an agreement with the department store chain’s creditors on a sweetened offer that could lead to a quick bankruptcy exit for the West’s largest retailer, sources close to the talks said Tuesday night.

Terms of the settlement were not available, although sources said the Zell/Chilmark Fund had sweetened its offer above its previous $240-million bid to win acceptance from creditors and bondholders of the retailer. Zell/Chilmark is expected to announce the agreement today, sources said.

The settlement came late Tuesday night as both sides continued to negotiate beyond a Tuesday deadline of 2 p.m. PDT for acceptance of the initial bankruptcy rescue bid from Zell/Chilmark. Sources said members of the creditors committee had held firm to their previously announced intentions to reject that offer as inadequate.

Tuesday’s developments are the latest chapter in a saga that began in July, when Chicago-based Zell/Chilmark Fund offered to pay Carter Hawley’s bondholders and trade creditors 40 cents on the dollar for their claims against the retailer.

But creditors representing about 24% of the outstanding claims last month balked at the offer as too low, apparently denying the fund the 80% majority approval it needed to proceed with its plan to take control of Carter Hawley and lead it out of bankruptcy.

The primary issue separating the two sides has been money.

Carter Hawley creditors and bondholders are owed a total of $550 million, and Zell/Chilmark offered just $220 million in late July to take over their positions and become the retailer’s largest creditor. Soon after that, the fund boosted the offer by $20 million.

Zell/Chilmark has said it would augment its creditor stake with a $50-million loan to the retailer in exchange for as much as a 90% equity stake in Carter Hawley.

Although creditors stymied Zell/Chilmark’s efforts for more than two months, their own demands for a greater payout had been undercut by the lack of other bids for Carter Hawley that could give additional money.

“It’s been a poker game between the two sides,” one source said. “Both sides have stared each other down and it came down to the deadline.”

Sources have said Zell/Chilmark, reluctant to outbid its own offer, had been trying to get creditors to believe that if they don’t accept the $240-million offer, a better deal wouldn’t be forthcoming.

Meanwhile, creditors had been holding out for as much as they can get, figuring that Zell/Chilmark would be willing to pay more for the 89-store chain, which includes the Broadway in Southern California.