NEW YORK — The bondholders’ committee representing $1.3 billion in claims in the R.H. Macy & Co. Inc. bankruptcy case, has rejected reorganization plans proposed by Macy’s and by Federated Department Stores Inc.
The bondholder group said both plans “undervalue the company and overstate the value of the company’s secured claims.”
The bondholders stand at the bottom of the list of priorities for a payout. Only holders of senior subordinated bonds are at the same level as trade creditors, who are expected to receive about 31 cents on the dollar from Macy’s. The other two classes are the junior and discount bonds.
Federated has not yet detailed its payment plans.
Under the Macy plan, only the senior bond holders get any payment on confirmation.
Two junior classes essentially get nothing on confirmation but will receive rights to buy Macy’s stock at a fixed price.
Bondholder claims are all unsecured.
Secured creditors are generally mortgage holders, such as The Prudential and Federated Department Stores, which bought half of Prudential’s $1 billion claim. Aside from the bondholders, no other classes of creditors have publicly backed or rejected either plan.
Just how important the bondholders’ rejection of the plans will be in the ultimate reorganization will depend on how vigorous they are in their opposition.
It will also depend on how much importance the court-appointed mediator, Cyrus Vance and Bankruptcy Judge Burton Lifland place on the bondholders’ position.
While subordinated claims don’t have an absolute right to any distribution if all other creditors aren’t paid in full, generally — if they make enough noise — they will get some payment.
The Macy plan is valued at $3.67 billion with an additional $260 million in warrants and rights. Federated values Macy at $3.51 billion. Bondholders have been pressing for a valuation of about $4 billion. At that level, there could be a substantial distribution for them.
Federated has said only that it would distribute $1.8 billion in debt, $1.48 million in stock and $222.4 million in cash. However, indications are that distribution to bondholders will be small.