Liberty House loan
called uncertain

But Bank of America says
their plan is solid

By Peter Wagner
Star-Bulletin

Bank of America Group's $50 million loan offering to Liberty House is not only more costly but far from certain, says the retailer's parent company.

JMB Realty Corp., the Chicago-based parent of Liberty House, is appealing a recent bankruptcy court decision approving the bank group's offering. JMB supports a competing $50 million offer from General Electric Capital Corp.

"There is general agreement that GECC's offers were cheaper than the bank's offers by between $200,000 and $250,000," said JMB attorney Larry Wolfson yesterday. "There is also general agreement that the GECC proposal was much more certain."

JMB on Monday filed an appeal in U.S. Bankruptcy Court following Judge Lloyd King's April 10 approval of the emergency financing. Wolfson said JMB will argue that a new board of directors appointed by the bank group last month did not act in good faith when it pushed for approval of the group's loan package.

A key point of contention is the "availability" of the newly approved Bank of America Group loan, which is at least 45 days from being signed off on by individual lenders within the group.

Unlike the GECC proposal, the bank group's offer requires new asset appraisals. If the results don't please the lenders, Wolfson said, the deal could be off.

"In the best of light, there is substantially more uncertainty on whether Liberty House will get the loan or not," he said.

But Bank of America attorney Tom Roesser said there is little doubt the appraisals will satisfy the concerns of the lenders.

"The bottom line is we're confident we have sufficient value to support the full value of the loan," Roesser said.

Appraisals done by an Illinois firm in February placed a $113.4 million value on three Liberty House leases, at Ala Moana Center, Pearlridge Center, and Kahala Mall. But because the appraisals do not meet standards under the federal banking regulation, new appraisals of company assets must be done. Roesser estimates it will take about 45 days.

Meanwhile, GECC -- not a federally regulated institution -- stands ready to accept the existing appraisals and issue the loan.

Wolfson said the JMB appeal is not meant to derail emergency financing. "We all agree Liberty House needs financing," he said.

Roesser said the question of the group's loan availability will soon be settled. "That issue will be resolved long before the appeal filed by JMB is ever resolved," he said. "It seems to be an absolutely moot issue."

And while the GECC offer would cost about $250,000 less in interest payments, it would bring greater costs, Roesser said. Potential disputes over the use of Liberty House cash collateral -- assets controlled by the bank group -- under the GECC loan could cost far more than was saved.

Roesser adds that $250,000 is small compared with more than $1 million in monthly interest payments that the lending group has waived during the reorganization.