Carter Hawley Hale Stores, parent of the Broadway department store, filed a reorganization plan Tuesday designed to eliminate $600 million in debt and allow it to emerge from Chapter 11 bankruptcy protection.
Under the reorganization plan, which is subject to the approval of a federal bankruptcy court, the Chicago investment partnership Zell/Chilmark would receive about 75% of the 30 million shares of stock in the reorganized Carter Hawley Hale.
In exchange for the stock, Zell/Chilmark is to invest $50 million in Carter Hawley Hale and assume $480 million of the Los Angeles-based retailer's $600 million in debt. The plan, which offered no surprises, is backed by its two largest secured creditors, the Prudential and Bank of America.
"This reorganization plan is designed to enable CHH to move forward on a financially sound basis so that it can compete vigorously in its markets," said Philip M. Hawley, chairman and chief executive of Carter Hawley Hale. "The plan . . . removes debt from our balance sheet and substantially reduces our leverage, puts in place long-term financing and provides a capital structure that will allow our store modernization to proceed."
The company said the long-awaited plan does not call for a new round of store closings or layoffs. The company last March confirmed plans to close up to 12 stores.
Zell/Chilmark's stake in the company is based on a formula that gives unsecured creditors--such as Zell/Chillmark--0.046 of a share of new common stock for every dollar they are owed by Carter Hawley Hale. Other unsecured creditors, who are owed $120 million, would receive about 17% of the total equity in the new company.
The plan calls for current shareholders to receive 0.081 of a share of new stock in the reorganized company and 0.084 of a warrant for every share they own of old stock, for a total of 8% of the equity.
A warrant is a certificate representing an option to buy one share of new stock at $17 per share over the next five years. If shareholders exercised all their warrants, they would control 13% of the total equity, the company said. Carter Hawley Hale employees are among the shareholders.
Carter Hawley Hale filed for protection from creditors under bankruptcy laws last Feb. 11. It was unable to continue getting bank credit because of heavy debt and weak sales nationwide. A hearing to approve the reorganization plan will be held July 29.
In March, in one reorganization phase, the company consolidated the merchandising and administrative operations for its four department store chains into a single unit based in Los Angeles.
The consolidation affected the retailer's San Francisco merchandising-administrative operations. Company officials have not said how many of the 400 workers there would be laid off, but executives say the company has actually added a net of 400 to 500 workers since declaring bankruptcy.
Carter Hawley Hale now operates its 88 stores under the names Broadway, Broadway Southwest, Emporium and Weinstocks.