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Rescue plan
for retailer suffers
court setback

Uncertainty continues
for Liberty House

---

By Rob Perez
Star-Bulletin

A proposed plan by the owners of Liberty House and Ala Moana Center to bring the kamaaina retailer out of bankruptcy hit a roadblock in court even as creditors were voting on a competing plan.

U.S. Bankruptcy Court Judge Lloyd King yesterday denied a motion to approve a disclosure statement that creditors would get before voting on the reorganization plan by JMB Realty Corp., Liberty House's owner, and General Growth Properties, Ala Moana's owner.

The denial added uncertainty over which of the two plans might be used to eventually bring Liberty House out of the Chapter 11 bankruptcy it has been under since March 1998.

While lawyers were debating yesterday's motion before King, creditors were casting final votes on the competing plan by Liberty House lenders, management and unsecured creditors.

Under that plan, the banks would get $130 million in new Liberty House stock, and another $40 million in creditor claims would be satisfied.

Yesterday was the last day to cast votes on the lender plan. A tally was not available.

King withheld approval on the General Growth/JMB plan, which would result in General Growth taking control of Liberty House in exchange for paying more than $200 million in claims, because the proponents had not completed the financial homework necessary to move the plan forward.

General Growth and JMB, however, are not precluded from refiling a motion asking for court approval once the work is done.

If approved, that plan also would be sent to creditors for a vote, and the court may have to decide which of the two would best resolve the bankruptcy case involving Hawaii's largest retailer.

In issuing his ruling, King echoed concerns raised by proponents of the lender plan that creditors may have been urged to vote against it based on the merits of the JMB/General Growth plan that hasn't been approved by the court. Such action would be illegal.

But attorney Daniel Murray, who represents JMB, said creditors were urged to vote against the lender plan based on its merits, not based on the JMB/General Growth plan.

Murray said the lender plan vastly undervalues Liberty House.