Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, January 28, 1992 TAG: 9201280034
SECTION: BUSINESS PAGE: A3 EDITION: METRO
SOURCE: Associated Press
DATELINE: NEW YORK LENGTH: Medium
MACY FILES FOR COURT HAVEN FROM CREDITORS
R.H. Macy & Co. Inc., the venerable retail institution that has defined "department store" for generations of shoppers, filed for Chapter 11 bankruptcy on Monday, dragged down by billions of dollars of debt, an unsuccessful leveraged buyout and the recession.The company announced the filing in a statement as Macy attorneys, hauling three boxes of documents, entered U.S. Bankruptcy Court on Monday afternoon.
"We have known for some time that Macy's had more debt than is desirable in such a weak economy . . ." Chairman Edward S. Finkelstein said in a statement. "We worked night and day to find a suitable solution and ultimately came to the conclusion that filing for Chapter 11 was best for Macy's future."
The 134-year-old retailer, burdened by $3.5 billion in loans from a 1986 leveraged buyout by Macy's management, was forced into bankruptcy court after a disappointing Christmas season left it without enough cash to pay suppliers.
Macy thus joined the ranks of big retailers who collapsed under the weight of junk-bond debt taken out during the buyout boom of the 1980s.
Macy operates 251 stores nationwide under such names as Macy's, I. Magnin and Bullock's.
The Chapter 11 filing, which ended Macy's two-year struggle to make ends meet, will allow the retailer to remain in business and reorganize its finances without retribution from unpaid creditors.
But the filing also tarnished the venerable image of the retailer made famous in the film "Miracle on 34th Street" and known to generations of Americans for its Thanksgiving Day parade.
Earlier this month, Macy said it was delaying payments to vendors by two weeks, until last Saturday, to comply with terms of its bank lending agreements.
In the meantime, the company tried to put together a rescue plan under which Loews Corp. Chairman Laurence Tisch, a major Macy stockholder and board member, would have invested another $1 billion in the company. Under the proposal, Macy creditors would have had to agree to restructure the debt.
However, a major creditor, the Prudential Insurance Co. of America, rejected the proposal and Tisch withdrew his offer Friday.
With no other options, Macy was forced to turn to bankruptcy court.
The company's cash shortage came at a critical time, as spring fashions are being shipped to retailers across the country. If suppliers do not ship their goods, Macy stands to lose even more in sales.
Chapter 11 would guarantee vendors payment on future shipments, so they could resume sending merchandise to Macy stores.
Macy's filing comes just as two major competitors, Federated Department Stores Inc. and Allied Stores Corp., prepare to emerge from bankruptcy reorganization.