By and  on February 22, 1994

NEW YORK -- It's getting close to crunch time for the bankrupt R.H. Macy & Co.

At 2 p.m. today, a hearing starts on Macy's request for an extension of the March 15 deadline for proposing a reorganization plan.

Meanwhile, Myron E. Ullman, Macy's chairman and chief executive officer, on a trip to California last week, may well have been further pursuing his efforts to gain funding to squelch the takeover ambitions of Federated Department Stores.

Macy's filed for Chapter 11 bankruptcy in January 1992 and has already been granted extensions on its exclusive right to issue a plan. The Bankruptcy Code requires a plan within 120 days of the filing of a Chapter 11 petition.

Normally, these hearings on extensions are routine matters. This hearing, however, before Chief Bankruptcy Judge Burton R. Lifland, could be different. Even the length of the hearing defies speculation: It could last an hour, or it could go on for several days.

The question of exclusivity has become crucial since Federated Department Stores entered the proceedings with the purchase of half of The Prudential's $1 billion secured claim against Macy's and made it clear that it wants to merge with Macy's.

Lawyers for creditor groups are expected to testify. It's also possible that Ullman will testify.

As long as Macy's has exclusivity, Federated is barred from filing a plan. Therefore, it is in Federated's interest to keep the extension short.

Federated has been busy courting other creditors, touting its strength in retailing and seeking their support. Macy's wants to remain independent.

Macy's reportedly has been seeking financial support for its efforts from General Electric Capital Corp., a large Macy's shareholder and the operator of the lucrative Macy's credit card business.

Last week, Ullman was on the West Coast. He attended I. Magnin's Valentine Ball in San Francisco, then flew to Los Angeles to meet with Aaron Clark of L.A.C.L.A. Investments, it was learned.

Clark is an advisor to Louis Paige, a Macy's board member and executive vice president of the Shaw Group, a Macy's investor. The Shaw Group is controlled by Run Run Shaw, a movie producer in Hong Kong.Ullman periodically meets with Clark to update him on Macy developments, but some sources believe that last week's meeting may have been part of Ullman's efforts to court investors in a plan to repay Federated and thwart Federated's merger bid.

Ullman did not return phone calls requesting comment Monday.

Although Macy's originally asked for a six-month extension that would move the deadline into September, there has been some creditor opposition to that much time. In view of the opposition, Macy's has agreed to shorten its request to Aug. 1. This is expected to head off most creditor opposition to the extension.

So far, Federated has not revealed what it has in mind for Macy's creditors but has been promoting itself as a retailer with a great future. Last week, it held meetings with representatives of secured and unsecured creditors. According to some who attended the meetings, Federated did not provide any specifics about a plan, just generalities about its own strengths.

Retail consultant Walter Loeb said he thinks Federated has a good chance of merging with Macy's.

"I think Macy's will come up with a plan, and Federated will come up with its own plan that would be more favorable to creditors," he said. "The payoff will probably be mostly in stock. If there is a choice between Macy stock and Federated stock, Federated certainly has an edge. Federated stock is trading, and the market has placed a value on it. What Macy's stock would be worth is purely a matter of conjecture."

Darryl Schall, a distressed securities analyst with Dabney Resnick & Wagner, Los Angeles, agrees that Federated looks like a winner.

"I think they're being smart not to tip their hand now about a plan," he said. "They would just be bidding against themselves. Why not wait until they see what Macy's offers and then come in and top it."

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