By and  on April 12, 1994

NEW YORK -- With R.H. Macy & Co. showing improvements in sales and earnings, bondholders and preferred shareholders are expected to renew their push to delay the firm's exit from Chapter 11.

At the same time, Macy's creditors began meeting Monday with court-appointed mediator Cyrus R. Vance and will continue those sessions all week. Federated Department Stores, which is trying to take over Macy's, said it will meet with Vance on Thursday or Friday in its capacity as a Macy's creditor.

But Federated will not present its proposal until next week, according to sources close to the company.

Meanwhile, a look at Macy's latest results shows that sales are ahead of plan and earnings before interest, taxes, depreciation and amortization (EBITDA) are running at an annual rate of $600 million, according to a source close to Macy's board.

"This means the company is worth well above the $3.6 billion used in Macy's preliminary plan," he said. "The Macy's franchise is continuing to improve and if allowed to run through another Christmas before locking in a plan, everyone should come out ahead. The bondholders and other unsecured creditors would get a better return and there may also be something for the preferred shareholders."

The source estimated that the value of the company could approach $5 billion if given another Christmas.

"The vultures are trying to steal the company. Valuations presented by The Blackstone Group and Merrill Lynch [investment bankers for Macy's] are both low-ball values," he added.

If Macy's is forced to come out before full value is realized, he said, it would not reflect favorably on Judge Burton R. Lifland, who prides himself on giving the debtor and creditors the best deal available, the source said.

"How would it look if six months after Macy gets out of Chapter 11, Fidelity Investments, which paid about $300 million for its $600 million claim in Macy's, announces that its stake is worth $2 billion? I don't think that would sit well with Lifland," he said.

As for Federated, the source said: "Federated would have to pay a lot more than the $3.6 billion if it wants to do a deal. A bid of $3.7 million wouldn't do it. Macy's is an improving situation and time is on its side."

To Read the Full Article

Tap into our Global Network

Of Industry Leaders and Designers

load comments
blog comments powered by Disqus