Carter Hawley Gets Its Second Wind : Retailing: With key creditors accepting an offer for their claims, the ailing firm is poised to emerge from bankruptcy protection some time in 1992.

Representatives of a key group of Carter Hawley Hale Stores creditors said Wednesday that they have accepted a sweetened, $280-million bid for their claims against the ailing retailer, opening the possibility that the chain will emerge from bankruptcy within the next eight months.

Under terms of the agreement, Zell/Chilmark, a Chicago-based investment firm headed by a businessman who likes to call himself “the Grave Dancer,” will pay trade creditors and Carter Hawley junk bondholders 47 cents on the dollar for their claims. The bid is 7 cents, or 17.5%, higher than the original offer from Zell/Chilmark that creditors rejected as inadequate.

In exchange for paying off Carter Hawley’s creditors, Zell/Chilmark is expected to get a controlling interest--possibly as much as a 90% stake--in the 89-store retailer, as well as the right to help develop a reorganization plan that will lead to the chain’s emergence from bankruptcy sometime in the first six months of next year. The retailer filed for protection under Chapter 11 of the U.S. Bankruptcy Code in February. “This is a very, very positive development for the company and a concrete step for our accelerated emergency from bankruptcy,” said an elated Philip M. Hawley, chairman and chief executive of Carter Hawley. The company’s directors voted Wednesday to support the deal struck between Zell/Chilmark and the store’s creditors.

Carter Hawley shares rose 25 cents to close at $1.75 Wednesday in trading on the New York Stock Exchange. The company’s 12% junk bonds due in 1996 jumped $48.75 to $480.00 per $1,000 face value, and its 12% bonds due in 2002 rose the same amount to the same closing price.

Bondholders and trade creditors, who are owed a total of about $550 million, have until Oct. 16 to formally accept the offer, and a minimum of 70% of the claims must be tendered to Zell/Chilmark for the deal to proceed.

However, representatives of holders of nearly one-quarter of the debt have already decided to accept it, and creditor groups contacted Wednesday expressed support for the deal.

“It is safe to assume that the vast majority will tender their debt,” said Jeff Werbalowsky, the financial adviser to a key group of creditors. “There will be little incentive for creditors to hold out.”

Zell/Chilmark’s active role in Carter Hawley’s bankruptcy is no accident. Samuel Zell, co-founder of the Zell/Chilmark fund, and Hawley have been friends and business associates for nearly two decades.

Hawley turned to Zell for a cash infusion before filing for Chapter 11 early this year, but Zell turned him down. Several months after the chain entered bankruptcy, Hawley’s representatives again approached Zell about buying out the retailer’s creditors in exchange for an interest in the chain. This time Zell accepted the offer, and the fund made its initial 40-cents-on-the-dollar offer.

Once the creditors are paid off, analysts said, Carter Hawley’s new owners face the daunting task of reviving the retailer, the West’s largest and the operator of the Broadway, Emporium, Weinstock’s and Broadway/Southwest chains.

“The chain is in serious disrepair,” said Kurt Barnard, a New York retailing consultant and publisher of a marketing newsletter. “The condition of the stores has been allowed to deteriorate. In order to be competitive today, you need to look your best.”

As part of its bid for the company, Zell/Chilmark has pledged an initial $50-million loan to allow the retailer to embark on an aggressive and sweeping modernization of many of its 89 stores. The total price tag for the program will likely exceed $100 million over the next several years, Zell said.

Hawley, who is expected to remain at the helm of the retailer indefinitely, said Wednesday that he hopes to begin the remodeling program within the next several months, with the expectation that several stores will be completely revamped by next year’s holiday sales season. Once the stores are remodeled, he said, they will rely less on price promotions and sales to attract customers.

Highlights of the Deal Terms of the $280-million deal between Carter Hawley Hale creditors and the Zell/Chilmark Fund:

Zell/Chilmark will pay suppliers and bondholders 47 cents on the dollar for their claims against Carter Hawley Hale Stores. An additional $20 million will be set aside to settle disputed claims.

Creditors have until Oct. 16 to tender their claims.

Zell/Chilmark must receive tenders from holders of at least 70% of the outstanding $550-million claims, as well as from two-thirds of the bondholders and suppliers. However, the deal lets Zell/Chilmark proceed if less than 70% of the debt is tendered.

Once the tender is complete, representatives from Zell/Chilmark and Carter Hawley would negotiate a plan to exchange Zell/Chilmark’s debt for an equity stake in the company. Zell/Chilmark has said it will push for as much as 90% of the company.