One-year anniversary

By Craig Kojima, Star-Bulletin
Shoppers gather around the cosmetics counter at
Liberty House in Ala Moana Center in a 1996 photo.
The retailer, which is operating under Chapter 11
bankruptcy, is more than $200 million in debt.

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Liberty House
creditors in limbo

Speculation swirls over the
retailer's future as the company
tries to formulate an acceptable
reorganization plan

By Peter Wagner
Star-Bulletin

IT'S been one year to the day since Liberty House shook Hawaii's retail industry with the biggest Chapter 11 bankruptcy in the state's history.

The March 19, 1998 filing knocked the wind out of an already faltering economy and gave dramatic emphasis to an unsettling trend of business failures, bankruptcy and mass layoffs in Hawaii.

With more than $200 million in debts to thousands of creditors, an unresolved battle over who controls the company, and mounting legal and professional bills, the case has proved both costly and complex. And as negotiators continue to look for a reorganization plan, the case is far from over.

Managers of the 150-year-old department store company for weeks have been meeting with owners and creditors in an attempt to find common ground on a reorganization plan. There was no indication yesterday that a consensual plan is forthcoming.

The unusual alliance so far has precluded competing plans, a hopeful sign for some fearing a protracted battle over the company's assets.

Liberty House had the exclusive right to file a reorganization plan -- detailing how it will repay creditors and conduct business -- until February 28. But the period of exclusivity came and went without a plan, allowing any interested party to file a plan of their own.

Some retail experts have speculated Liberty House will be sold or merged with another company which would absorb the retailer's debts. Liquidation, while possible, is generally seen as unlikely because the major creditors, led by Bank of America, could end up with less than the roughly $150 million that they are owed.

Meanwhile, some local vendors have put their hopes on hold.

"Our patience is beginning to run a little low because they don't seem to be coming up with a definitive plan," said Steve Scott, president and owner of Scott Hawaii, which supplies Liberty House with custom made sandals.

The company is owed $10,719 for merchandise delivered before the bankruptcy filing, a debt frozen by the bankruptcy process pending a resolution of the case.

"They seem in limbo. I just wish one of the boards would get together with the other or come up with some reorganization plan."

But Scott said he thinks Liberty House will find its way out of trouble. "After all, Liberty House does have a place in the retail market in Hawaii."

Jeweler Leighton Lam of Leighton Lam Designs Inc. said the $7,967 his company is owed is a small price to pay for what it has gained in ten years of business with Liberty House.

"If we have to give up one month of invoices to see them survive, that's our biggest wish," he said.

"A lot of people have been bashing Liberty House but in the bigger picture they've done a lot more good than bad. Every business goes through bad times."

Lam also said he believes Liberty House will emerge successfully from its bankruptcy.

"It sounds like once they figure out who's going to be the owner of the company, they'll go forward from there."

Other creditors were supportive and hopeful for the venerable retailer.

"Our feeling is Liberty House has kind of bounced back after their refinancing," said Errol Desilva, president and owner of Camera Hawaii Inc., referring to the $50 million emergency financing Liberty House secured last year to tide it through a tough year.

The company, which for 25 years has been photographing Liberty House catalogs, is owed $11,883.

But Desilva said he doesn't lose sleep over the year-old billing.

"We are in a current working relationship with them which is very good. We can't complain."