Federated Maintains its Pace in Earnest Pursuit of Macy’s

NEW YORK -- Federated Department Stores shows no signs of backing off from its pursuit of R.H. Macy & Co.<BR><BR>Even though the bankruptcy court recently reaffirmed Macy's exclusive right to file a plan, Federated reportedly continued to work...

NEW YORK — Federated Department Stores shows no signs of backing off from its pursuit of R.H. Macy & Co.

Even though the bankruptcy court recently reaffirmed Macy’s exclusive right to file a plan, Federated reportedly continued to work through the mediation process this week, holding meetings with various creditor classes to seek their support while extolling the benefits of a combined Macy’s-Federated operation and knocking Macy’s plan.

Some sources said they even expect Federated to sweeten its offer beyond its current $3.5 billion proposal.

The behind-the-scenes efforts reportedly included meetings this week with Cyrus Vance, the court-appointed mediator, though the substance of these meetings could not be learned.

Federated officials would not comment, and Vance’s attorneys did not return phone calls.

It is believed that Macy’s officials also met with Vance this week, but Macy’s couldn’t be reached. Macy’s attorneys declined to comment on the mediation process.

Federated’s continued reliance on the mediation process comes two weeks after Bankruptcy Judge Burton R. Lifland directed Macy’s to file a plan as soon as possible and reaffirmed Macy’s exclusivity period, giving Macy’s a corner on filing a plan.

His announcement came after several weeks of intense mediation between Vance, Macy’s and creditor groups, including Federated. When the mediation process failed to produce a consensus plan, Lifland, in his announcement, shifted back to a single Macy’s plan-based reorganization. Subsequently, Macy’s said it would file a plan on June 30.

While bondholders said they are backing Macy’s, Federated reportedly has gotten some creditors — including Fidelity Investments, Prudential Life Insurance and others — on its side.

Macy’s proposal values the chain at $3.8 billion and pays unsecured creditors a combination of cash, equity, debt and gift certificates. Federated, hopeful that Macy’s plan gets voted down, has proposed a value of $3.5 billion but believes the equity portion of its payout is more valuable.

In addition, Federated is expected to file a competing plan if Macy’s plan is not approved. According to market sources Thursday, senior creditors — possibly including Federated — are preparing a court challenge to Macy’s exclusivity, which currently runs through Aug. 1.

Some sources believe that although bondholders have issued a public statement in support of Macy’s, it may have been a ploy to push Federated into sweetening its package.

Meanwhile, the Bloomingdale’s division of Federated is stepping up its search for sites in Southern California, including Los Angeles and Orange Counties.

“Southern California is the single greatest opportunity for Bloomingdale’s,” said Michael Gould, chairman and ceo. “There is certainly a good case for four, maybe five, stores over the next five years,” said Gould. “The customer is there. It’s a vibrant marketplace and an enormous opportunity for our type of merchandise.”

He added “Sixty thousand customers from California in the last 12 months have visited our stores or shopped by mail. That’s staggering.”

While no announcements on particular sites are imminent, Gould said, Federated real estate executives are combing the market. He said Bloomingdale’s could either build new stores or convert existing stores from other companies that could be up for sale. There has been speculation that units of Macy’s, including Bullock’s stores, or units of Carter Hawley Hale, could be converted into Bloomingdale’s.