By and  on January 4, 1994

NEW YORK -- R.H. Macy & Co. is giving Federated Department Stores the cold shoulder.

Federated took the first step toward taking over Macy's when it bought a significant stake of Macy's secured debt on Friday. But Macy chairman and chief executive officer Myron E. Ullman said Monday, "The company is not for sale and neither are its pieces."

Ullman met Monday with Allen Questrom, Federated's chairman and ceo; James Zimmerman, Federated's president, and Ronald Tysoe, vice chairman and chief financial officer of Federated, at Macy's headquarters here.

Although nothing decisive happened at the meeting, it seemed that both sides came away with different reactions.

Zimmerman said, "We left with the clear understanding that we'd be talking again. It was a good start in working together. It was cordial, positive and productive."

Even though many of the chain's investors and creditors seem to welcome the Federated move, Ullman said no plans have been set for another meeting, and that Macy's priorities have not changed.

"I expressed to them that we have a business plan that has been accepted by creditors and that we are discussing a plan for reorganization," he said.

Over the weekend, Federated paid $449.3 million for 50 percent of the secured claim of Macy's largest creditor, Prudential Insurance Co. of America. The claim is backed by mortgages on 70 of Macy's 110 department stores. Federated also has an option to acquire the other half of the $1 billion claim within three years.

In a coolly worded statement, Macy's referred to Federated only as a "creditor," and said it would continue to work with all creditors on a consensual plan. "We view Federated as a creditor holding a portion of Prudential's claim," the statement said.

With a position as a fully secured creditor, Federated would not automatically have much of a say in Macy's Chapter 11. However, if it can convince other creditors that a stake in a combination of Federated and Macy's would be much more valuable than just an interest in Macy's, it could win enough support to take over the company, according to analysts.

Some speculate that Federated might throw some or all of its claim into the Macy's pot to provide working capital in the post-Chapter 11 period or accept a large equity piece in place of payment of its claim.

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