Carter Hawley Holders to Get Say in Overhaul

The U.S. trustee overseeing the Carter Hawley Hale Stores bankruptcy Wednesday appointed a seven-member committee to represent the interests of the company’s shareholders in the upcoming reorganization of the troubled department store chain.

The primary reason behind the naming of the committee, the trustee said, is the fact that Carter Hawley shareholders will see their stake decline substantially once the Zell/Chilmark Fund converts its debt holdings in the retailer into equity and becomes the company’s controlling shareholder.

Six of the seven members of the new shareholder committee are either current or past employees of Carter Hawley. This is a recognition that the employees’ profit-sharing plan is the company’s single largest shareholder, with a 35% stake in the firm.

Names of the committee members, U.S. Trustee Marcy J. K. Tiffany said, will not be released until the federal judge overseeing the bankruptcy case formally approves the appointments.

Tiffany said she views the appointment of the committee as critical to the outcome of the Carter Hawley bankruptcy because shareholders’ portion of the company will shrink as a result of Zell/Chilmark’s successful purchase last week of about 80% of the retailer’s outstanding debts.

In exchange for forgiving those debts, which Zell/Chilmark bought for 47 cents on the dollar from Carter Hawley creditors, Zell/Chilmark has said it plans to seek control of as much as 90% of the retailer’s stock. This process will probably require the issuing of new stock to the Chicago-based investment partnership, diluting existing shareholders’ holdings.