Bankruptcy Court Approves Disclosure Statement
CINCINNATI (AP) _ Federated Department Stores Inc. and Allied Stores Corp. won court permission Monday to submit their bankruptcy reorganization plan to creditors for their approval.
U.S. Bankruptcy Judge J. Vincent Aug Jr. approved the financial disclosure statement the companies filed in support of the reorganization plan, opening the way for a creditor vote.
Lawyers for the retailers and creditors told Aug their negotiations in recent weeks had settled creditors’ objections. The lawyers told Aug they are optimistic about prospects for the plan’s approval.
Aug authorized a creditor voting period from Nov. 5 to Dec. 20.
Federated and Allied said they expect to mail about 45,000 solicitation packages to creditors beginning next week. The Cincinnati-based companies entered the nation’s largest Chapter 11 retail reorganization case on Jan. 15, 1990, listing more than $7.7 billion in debt.
In order for the reorganization plan to be approved, at least 50 percent of each class of creditors - with some exceptions - representing at least two- thirds of that group’s debt prior to the Chapter 11 filing, must give approval. The voting is done by mail.
If creditors accept the plan, it is then subject to approval by Aug, who scheduled a confirmation hearing for that purpose Jan. 9-10 in Cincinnati. He would then determine whether Federated and Allied have obtained the required votes from each creditor group and whether all other legal requirements have been satisfied before confirming the plan.
Federated and Allied hope to emerge from reorganization as a publicly traded company to be known as Federated Department Stores Inc.
James M. Zimmerman, president and chief operating officer of Federated and Allied, said the companies still hope to meet their self-imposed Feb. 3 deadline for emerging from reorganization.
″There are no guarantees, but with the approval of our disclosure statement today we have taken a major step toward the future,″ Zimmerman said. Lewis Rosenbloom, a lawyer representing Federated’s unsecured creditors including merchandise suppliers and real estate developers, said the disclosure statement calls for his clients to be paid more than 100 percent of their claims over a three-year period.
He said that includes 75 percent in cash when the plan becomes effective and the court allows claims, plus the balance and interest payable over three years.
The settlement will allow Federated and Allied to maintain credit with merchandise suppliers whose support they will need after emerging from reorganization, Rosenbloom said.
Federated and Allied entered reorganization after being unable to handle debt incurred by Campeau Corp. to buy the retailers in the late 1980s.