NEW YORK — R.H. Macy & Co.’s official bondholders’ committee Wednesday put its weight behind Macy’s $3.7 billion proposal, strengthening the retailer’s effort to remain independent, despite Federated Department Store’s merger efforts.
Reacting to Federated’s statements earlier this week that the offer Macy’s made to bondholders was valued at zero, the bondholders said yesterday they valued the Macy’s payout at between $525 million and $570 million, assuming the successful completion of a 50 percent rights offering.
Bondholders had previously rejected Macy’s $3.6 billion proposal and said they would not throw their support behind any proposal that valued Macy’s at less than $4 billion. “The bondholders’ committee has reached an agreement in principle with Macy’s to support a revised reorganization plan to be filed in the Bankruptcy Court, which calls for an independent company to emerge from Chapter 11,” the group said in a statement.
The bondholders’ committee, which represents roughly $1.3 billion in claims, said holders of the 14.5 percent senior subordinated debentures due 1998 would receive $790 to $860 in value for every $1,000 bond held. For every $1,000 held of 14.5 percent subordinated debentures due 2001, owners would get $370 to $400 in value.
Holders of the most junior bonds, the zero subordinated debentures due 2001, would get $130 to $140 in value.
The senior bonds are currently trading at about $57; the middle-level bonds at $20 and the junior bonds at about $5.
The bondholders’ support for Macy’s improves the retailer’s chances of eventually getting its plan of reorganization approved by Bankruptcy Court Judge Burton R. Lifland.
Judge Lifland had appointed Cyrus R. Vance as mediator, hoping to win a consensus plan among all creditors.
Two weeks of intense negotiations between Vance and creditors failed to produce a consensual plan. Judge Lifland then directed Macy’s to continue with the mediation process but, at the same time, to ready a plan as soon as possible.
Federated reportedly has the support of secured creditors, with $2.6 billion in claims, and trade creditors, with $400 million in claims. Several senior creditors could not be reached for comment. The lead attorney for the unsecured creditors’ committee would not comment on whether he had thrown the group’s support behind Federated.
Macy’s exclusive period for filing a plan ends Aug. 1. After that, Federated or any other creditor can file a plan.
According to a market source, “Federated never really came to the table with an offer to bondholders, thus turning the bondholders’ committee toward Macy’s.”
“I still believe that Federated will come up with an offer of about $450 for bondholders and win their hand,” said the source. “They seem to really have their heart set on winning this battle.” He added that Federated feels it might be worth spending a little more now in order to create a “great enterprise” down the road.