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Macy's files for Chapter 11

By EVE TAHMINCIOGLU UPI Business Writer

NEW YORK -- R.H. Macy & Co., the 133-year-old retailer that set the standards for American department stores, Monday filed for bankruptcy protection under the weight of $5.3 billion in liabilities and mounting losses.

After months of struggling to survive cash shortages and a slump in sales brought on by the recession, the retailer decided to seek Chapter 11 bankruptcy protection from creditors at a board meeting Monday.

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The long-expected filing came after Macy's missed a Saturday deadline for paying its vendors and Loews Corp. Chairman Laurence Tisch withdrew an offer to invest $1 billion in exchange for a controlling interest in the department store.

Macy's said the filing in the U.S. Bankruptcy Court for the Southern District in Manhattan will enable the company to continee operating while it reorganizes its debt. The retailer has been laboring under $3.7 billion in corporate debt.

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'Throughout the nation, the 1991 retail year has achieved the dubious distinction of probably having been the worst sales period on record since the Great Depression of the 1930s,' Macy's said in its filing.

Noting the critical holiday selling season never materialized in 1991, Macy's said, 'It was the Christmas that never came.'

The Macy's court papers listed $5.3 billion in liabilities and $4.94 billion in assets.

Bank of Montreal Trust was named as Macy's largest unsecured creditor in the filing with claims of $627.8 million, followed by IBJ Bank & Trust Co. in New York with $625.36 million. Among other large unsecured creditors, Macy's listed The Connecticut National Bank ($384 million), Alexander and Alexander insurance brokers ($6.27 million), and Kraus- Anderson Construction ($1.754 million) in Minneapolis.

As part of the decision to file for bankruptcy protection, Macy's said it had obtained $600 million in financing commitments from Chemical Bank and Bankers Trust.

Chemical spokeswoman Alison McDonald said Chemical and Bankers Trust would provide upon bankruptcy court approval the cash necessary for Macy's future needs, including salaries for its 69,500 full-time workers and new vendor invoices.

McDonald said Chemical was the lead bank in the refinancing but would not reveal specifics on the plan.

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The retailer operates Macy's stores throughout the United States, I. Magnin stores on the West Coast, Bullock's stores in Arizona, California and Nevada and specialty stores under other names.

Analysts said Macy's bankruptcy filing should little immediate impact on its customers.

'Chapter 11 will offer them the breathing space they need to regroup and emerge as a stronger company,' said George Ashur, director of bond research at Chase Securities.

Under bankruptcy court supervision, Macy's should be able to borrow cash desperately needed for operations and suppliers, who in some cases have closed their warehouse doors to the retailer.

Moody's Investors Service Monday downgraded $1.3 billion of Macy's long-term debt to Ca from Caa -- one step above the rating agency's lowest grade -- because it could not pay its more than 20,000 vendors.

Even at Macy's flagship store on 34th Street in Manhattan, the shelves were somewhat bare over the weekend. The retailer reportedly was forced to cancel a major advertising campaign next Sunday because of a lack of merchandise.

Macy's vendors, who were notified Jan. 10 that payments would be two weeks late, saw the deadline come and go Saturday. The retailer delayed payments to meet obligations to lenders under a $587.7 million revolving credit line.

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'We worked day and night to find a suitable solution and ultimately came to the conclusion that filing for Chapter 11 was best for Macy's future,' Edward Finkelstein, chairman and chief executive officer, said in a statement.

He said Macy's knew it was carrying too much debt but was able 'to ride out most of the turbulence of the past few years' until 'consumer confidence plummeted in recent weeks, creating a much more difficult Christmas season than expected.'

Finkelstein led a $3.5 billion leveraged buyout of Macy's in 1986. The retailer began to slide even deeper into debt after it shelled out $1 billion to acquire I. Magnin and Bullock's in 1988.

Macy's junk bonds dropped early Monday on speculation the retailer would seek Chapter 11 and then tumbled later in the day after the filing.

Macy's junk bonds are unsecured and the holders could lose virtually all their value.

Ashur said Macy's probably would emerge from bankruptcy much more quickly than Allied and Federated Department Stores because Macy's is only one company.

'Macy's is a sound company,' said Ashur, who dismissed any suggestion that the company would go the way of shuttered New York retailers Gimbels, B. Altman and Bonwit Teller.

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All Macy's, Bullock's and I. Magnin stores were open Monday and operating as usual.

Bob Moncrieffe, a shopper from Long Beach, N.Y., said he bought two shirts Monday at Macy's flagship Herald Square store because 'I felt sorry for them.'

Macy's was propelled to the brink of bankruptcy late Friday when Tisch ended talks to pump $1 billion into retailer after Prudential Insurance Co. of America, a major creditor, would not reduce interest rates enough on its $811 million mortgage on about 70 Macy's stores.

Tisch, chairman of CBS Inc., already owns 15.6 percent of Macy's.

Macy's said the filing, which was made in the U.S. Bankruptcy Court for the Southern District of New York, will enable the company to conduct business as usual while it reorganizes its debt.

As part of the decision to file for bankruptcy protection, Macy's said it had obtained $600 million in financing commitments from Chemical Bank and Bankers Trust.

The company operates Macy's stores throughout the United States, I. Magnin stores on the West Coast, Bullock's stores in Arizona, California and Nevada and specialty stores under other names.

Analysts said Macy's bankruptcy filing should have no impact on its customers other than that they would see a replenished inventory, depleted by some vendors' decisions to hold up shipments due to lack of payment.

Advertisement

'Chapter 11 will offer them the breathing space they need to regroup and emerge as a stronger company,' said George Ashur, director of bond research at Chase Securities.

Under bankruptcy court supervision, Macy's should be able to borrow cash desperately needed for operations and suppliers, which in some cases have closed their warehouse doors to the retailing chain.

Even at Macy's flagship store on 34th Street in Manhattan, the shelves were somewhat bare over the weekend. The retailer reportedly was forced to cancel a major advertising campaign scheduled for next Sunday because of a lack of merchandise.

Macy's vendors, which were notified Jan. 10 that payments would be two weeks late, saw the deadline come and go Saturday. The retailer delayed payments to meet obligations to lenders under a $587.7 million revolving credit line.NEWLN: more

The Macy's board met Monday and decided to take the retailer into bankruptcy protection.

'We worked day and night to find a suitable solution and ultimately came to the conclusion that filing for Chapter 11 was best for Macy's future,' Edward Finkelstein, chairman and chief executive officer, said in a statement.

He said Macy's knew it was carrying too much debt but was able 'to ride out most of the turbulence of the past few years' until 'consumer confidence plummeted in recent weeks, creating a much more difficult Christmas season than expected.'

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Finkelstein led a $3.5 billion leveraged buyout of Macy's in 1986. The retailer began to slide into even deeper debt after it shelled out $1 billion to acquire I. Magnin and Bullock's in 1988.

All Macy's, Bullock's and I. Magnin stores were open Monday and operating as usual.

Macy's was propelled to the brink of bankruptcy late Friday when Tisch ended talks to pump as much as $1 billion into the debt-laden retailer because Prudential Insurance Co. of America, a major ceditor, would not reduce interest rates enough on its $811 million mortgage on some 70 Macy's stores.

Tisch, who also is the chairman of CBS Inc., already owns 15.6 percent of Macy's.

The deal fell through on the eve of Macy's Saturday deadline to pay its more than 20,000 suppliers.

'They (Macy's) called me on Jan. 10 and said they'd have to hold up payment for two weeks because they couldn't pay everyone everything they owed,' said Bud Konheim, chairman of Nicole Miller, an apparel manufacturer.

'They never said they would definitely pay the bills on Saturday,' he said. 'Everyone knew that those payments would be difficult to make because they have had a major restraint on cash flow and they've been looking for financing.'

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Nicole Miller went ahead and shipped the retailer merchandise Jan. 10 despite not being paid.

'For the past 24 months we've been advised by experts not to ship to Macy's, but we shipped to them anyway,' Konheim said. 'For the past 23 months we got paid, now they missed one payment.'

Konheim, who said he and other Macy's vendors have been in limbo, welcomed a Chapter 11 filing in the hours before the retailer sought bankruptcy protection.

'Then we'll get the money for all the goods even if it's not for a few years and we'll know where we stand,' he said.

R.H. Macy & Co., the 133-year-old retailer that set the standards for American department stores, Monday filed for bankruptcy protection under the weight of $5.3 billion in liabilities and mounting losses.

After months of struggling to survive cash shortages and a slump in sales brought on by the recession, the retailer decided to seek Chapter 11 bankruptcy protection from creditors at a board meeting Monday.

The long-expected filing came after Macy's missed a Saturday deadline for paying its vendors and Loews Corp. Chairman Laurence Tisch withdrew an offer to invest $1 billion in exchange for a controlling interest in the department store.

Advertisement

Macy's said the filing in the U.S. Bankruptcy Court for the Southern District in Manhattan will enable the company to conduct business as usual while it reorganizes its debt. The retailer has been laboring under $3.7 billion in corporate debt.

'Throughout the nation, the 1991 retail year has achieved the dubious distinction of probably having been the worst sales period on record since the Great Depression of the 1930s,' Macy's said in its filing.

Noting the critical holiday selling season never materialized in 1991, Macy's said, 'It was the Christmas that never came.

The Macy's court papers listed $5.3 billion in liabilities and $4.94 billion in assets.

Bank of Montreal Trust was named as Macy's largest unsecured creditor in the filing with claims of $627.8 million, followed by IBJ Bank & Trust Co. in New York with $625.36 million. Among other large unsecured creditors, Macy's listed The Connecticut National Bank ($384 million), Alexander and Alexander insurance brokers ($6.27 million), and Kraus- Anderson Construction ($1.754 million) in Minneapolis.

As part of the decision to file for bankruptcy protection, Macy's said it had obtained $600 million in financing commitments from Chemical Bank and Bankers Trust.

Chemical spokeswoman Alison McDonald said Chemical and Bankers Trust would provide upon bankruptcy court approval the cash necessary for Macy's future needs, including salaries for its 69,500 full-time workers and new vendor invoices.

Advertisement

McDonald said Chemicalwas the lead bank in the refinancing but would not reveal specifics on how much of the $600 million the bank was putting up.

The retailer operates Macy's stores throughout the United States, I. Magnin stores on the West Coast, Bullock's stores in Arizona, California and Nevada and specialty stores under other names.

Analysts said Macy's bankruptcy filing should have no impact on its customers other than to replenish inventory depleted by some vendors' decisions to hold up shipments due to lack of payment.

'Chapter 11 will offer them the breathing space they need to regroup and emerge as a stronger company,' said George Ashur, director of bond research at Chase Securities.

Under bankruptcy court supervision, Macy's should be able to borrow cash desperately needed for operations and suppliers, who in some cases have closed their warehouse doors to the retailing chain.

Moody's Investors Service Monday downgraded $1.3 billion of Macy's long-term debt to Ca from Caa -- one step above the rating agency's lowest grade -- because it could not pay its more than 20,000 vendors.

Even at Macy's flagship store on 34th Street in Manhattan, the shelves were somewhat bare over the weekend. The retailer reportedly was forced to cancel a major advertising campaign next Sunday because of a lack of merchandise.

Advertisement

Macy's vendors, who were notified Jan. 10 that payments would be two weeks late, saw the deadline come and go Saturday. The retailer delayed payments to meet obligations to lenders under a $587.7 million revolving credit line.

'We worked day and night to find a suitable solution and ultimately came to the conclusion that filing for Chapter 11 was best for Macy's future,' Edward Finkelstein, chairman and chief executive officer, said in a statement.

He said Macy's knew it was carrying too much debt but was able 'to ride out most of the turbulence of the past few years' until 'consumer confidence plummeted in recent weeks, creating a much more difficult Christmas season than expected.'

Finkelstein led a $3.5 billion leveraged buyout of Macy's in 1986. The retailer began to slide even deeper into debt after it shelled out $1 billion to acquire I. Magnin and Bullock's in 1988.

Macy's junk bonds dropped early Monday on speculation the retailer would seekChapter 11 and then tumbled later in the day after the filing.

Macy's junk bonds are unsecured and the holders could lose virtually all their value.

Ashur said Macy's probably would emerge from bankruptcy much more quickly than Allied and Federated Department Stores because Macy's is only one company. Allied and Federated are due out of Chapter 11 in February after nearly three years in bankruptcy.

Advertisement

'Macy's is a sound company,' said Ashur, who dismissed any suggestion that the company would go the way of shuttered New York retailers Gimbels, B. Altman and Bonwit Teller.

All Macy's, Bullock's and I. Magnin stores were open Monday and operating as usual.

Bob Moncrieffe, a shopper from Long Beach, N.Y., said he bought two shirts Monday at Macy's flagship Herald Square store because 'I felt sorry for them.'

Macy's was propelled to the brink of bankruptcy late Friday when Tisch ended talks to pump $1 billion into retailer after Prudential Insurance Co. of America, a major creditor, would not reduce interest rates enough on its $811 million mortgage on about 70 Macy's stores.

Tisch, also chairman of CBS Inc., already owns 15.6 percent of Macy's.

Macy's said the filing, which was made in the U.S. Bankruptcy Court for the Southern District in Manhattan, will enable the company to conduct business as usual while it reorganizes its debt.

As part of the decision to file for bankruptcy protection, Macy's said it had obtained $600 million in financing commitments from Chemical Bank and Bankers Trust.

The company operates Macy's stores throughout the United States, I. Magnin stores on the West Coast, Bullock's stores in Arizona, California and Nevada and specialty stores under other names.

Advertisement

Analysts said Macy's bankruptcy filing should have no impact on its customers other than to replenish inventory, depleted by some vendors' decisions to hold up shipments due to lack of payment.

'Chapter 11 will offer them the breathing space they need to regroup and emerge as a stronger company,' said George Ashur, director of bond research at Chase Securities.

Under bankruptcy court supervision, Macy's should be able to borrow cash desperately needed for operations and suppliers, which in some cases have closed their warehouse doors to the retailing chain.

Even at Macy's flagship store on 34th Street in Manhattan, the shelves were somewhat bare over the weekend. The retailer reportedly was forced to cancel a major advertising campaign scheduled for next Sunday because of a lack of merchandise.

Macy's vendors, which were notified Jan. 10 that payments would be two weeks late, saw the deadline come and go Saturday. The retailer delayed payments to meet obligations to lenders under a $587.7 million revolving credit line.NEWLN: more

The Macy's board met Monday and decided to take the retailer into bankruptcy protection.

'We worked day and night to find a suitable solution and ultimately came to the conclusion that filing for Chapter 11 was best for Macy's future,' Edward Finkelstein, chairman and chief executive officer, said in a statement.

Advertisement

He said Macy's knew it was carrying too much debt but was able 'to ride out most of the turbulence of the past few years' until 'consumer confidence plummeted in recent weeks, creating a much more difficult Christmas season than expected.'

Finkelstein led a $3.5 billion leveraged buyout of Macy's in 1986. The retailer began to slide into even deeper debt after it shelled out $1 billion to acquire I. Magnin and Bullock's in 1988.

All Macy's, Bullock's and I. Magnin stores were open Monday and operating as usual.

Macy's was propelled to the brink of bankruptcy late Friday when Tisch ended talks to pump as much as $1 billion into the debt-laden retailer because Prudential Insurance Co. of America, a major ceditor, would not reduce interest rates enough on its $811 million mortgage on some 70 Macy's stores.

Tisch, who also is the chairman of CBS Inc., already owns 15.6 percent of Macy's.

The deal fell through on the eve of Macy's Saturday deadline to pay its more than 20,000 suppliers.

'They (Macy's) called me on Jan. 10 and said they'd have to hold up payment for two weeks because they couldn't pay everyone everything they owed,' said Bud Konheim, chairman of Nicole Miller, an apparel manufacturer.

Advertisement

'They never said they would definitely pay the bills on Saturday,' he said. 'Everyone knew that those payments would be difficult to make because they have had a major restraint on cash flow and they've been looking for financing.'

Nicole Miller went ahead and shipped the retailer merchandise Jan. 10 despite not being paid.

'For the past 24 months we've been advised by experts not to ship to Macy's, but we shipped to them anyway,' Konheim said. 'For the past 23 months we got paid, now they missed one payment.'

Konheim, who said he and other Macy's vendors have been in limbo, welcomed a Chapter 11 filing in the hours before the retailer sought bankruptcy protection.

'Then we'll get the money for all the goods even if it's not for a few years and we'll know where we stand.'

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