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Carter Hawley Creditors: Bailout Offer Inadequate

September 10, 1991

LOS ANGELES (AP) _ A committee of Carter Hawley Hale Stores creditors refused to endorse a $240 million bailout offer for the retailer, hoping for a better bid.

The committee said late Monday it ″was not in a position to recommend″ the offer by Zell-Chilmark Fund, a $1 billion limited partnership headed by Chicago businessman Sam Zell that was set up to invest in troubled companies.

Zell is offering 40 cents on the dollar to the creditors with more than $550 million in claims against Carter Hawley Hale, which filed for bankruptcy protection from its creditors in February.

In a statement, lawyers for the creditors said they had discussed with Zell-Chilmark the possibility of increasing the price. The creditors committee also said two other interested parties had been given confidential information by Carter Hawley Hale to study.

The committee stopped short of rejecting the Zell-Chilmark offer, which was to expire Monday, Sept. 16. A hearing is scheduled that day in bankruptcy court.

Zell-Chilmark is expected to extend its offer for at least a week to give the creditors committee more time.

″The first question is will Zell raise his price?″ said Jeffrey Werbalowsky, a managing director of Houlihan, Lokey, Howard and Zukin, the financial adviser to the creditors committee. ″And if so, by how much? And, second, will somebody else make a bid?″

Werbalowsky said he expected no additional bids immediately. Neither he nor Carter Hawley Hale spokesman Bill Dombrowski would identify the parties looking at the confidential information.

Dillard Department Stores of Little Rock, Ark., had previously shown some interest in a bid, according to an earlier filing in Carter Hawley Hale’s bankruptcy case. It was unclear if Dillard was still interested.

Dillard has expanded aggressively over the past few years. But it has never acquired a company as big as Carter Hawley Hale, the West’s largest retailer with 89 Broadway, Broadway Southwest, Emporium and Weinstocks stores. Nor does Dillard have a history of fighting over an acquisition target.

The Zell-Chilmark offer is void if rejected by more than 20 percent of the creditors.

In addition to paying the creditors $240 million for their claims, Zell- Chilmark would lend Carter Hawley Hale $50 million to remodel stores.

It is expected that in return for buying the debt and making that loan, it would be given a large, perhaps controlling interest in the company when Carter Hawley Hale emerges from Chapter 11 bankruptcy proceedings.

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