Friday, April 30, 1999

Owners submit
Liberty House plan

JMB Realty says its version
of reorganization is better for
creditors than one filed
by the lenders

By Russ Lynch


Liberty House The Chicago-based owners of the bankrupt Liberty House chain filed their own reorganization plan today, saying it is far better for creditors than the one filed April 13 by the company's lenders.

The plan calls for paying out cash to repay some of the debt and issue new Liberty House shares and new notes to cover most of the rest. Parent JMB Realty Corp. said the combination of cash and stock will be worth $252.4 million and just about everybody will have 100 percent of their claims satisfied.

The plan is subject to the approval of the creditors and the federal bankruptcy court and could be just one of several plans that come before the judge.

In the JMB plan, the lenders' group led by Bank of America would get their payoff in the form of new secured notes equal to 100 percent of their debt and paying 10 percent interest. Holders of unsecured claims worth $5,000 or less would be paid 95 percent of what they are owed in cash.

Unsecured creditors owed more than $5,000 would get the new Liberty House shares in the full value of their claims.

The lenders' plan filed earlier called for unsecured creditors to get about half their money.

However, attorneys in the Chapter 11 bankruptcy case said today that the lenders and the unsecured creditors have reached an agreement that may change that. Details were not available because the agreement has not been filed in court.

The BofA-led group's plan calls for the lenders to get most of their money back in the form of stock. That plan would create stock worth about $146 million and give about $133 million of that to the lenders.

Tom Roesser, the lenders' Honolulu attorney, said he had not seen the JMB plan and could not comment on it.

But he said the agreement with the unsecured creditors leaves JMB as "the only creditor not happy with us."

JMB, meanwhile, said its plan "places a fair and equitable value on Liberty House's business that far exceeds the irresponsibly low value placed on Liberty House's business by the lenders and vulture funds."

The lenders' plan would leave Liberty House "almost exclusively owned by the lenders," said Steve Plonsker, JMB executive vice president. The JMB plan provides for "meaningful distributions" of Liberty House stock to the interested parties and would keep the current owners, officers and staff in place, Plonsker added.

A hearing on the reorganization proposals is scheduled for May 26 before U.S. Judge Lloyd King, head of the bankruptcy court in Hawaii.

Liberty House was acquired by JMB Realty in 1988 when JMB bought the retailer's parent, Amfac Inc. The 150-year-old retail business suffered from the slowdown in the Hawaii economy through the 1990s, the arrival of big new discount competitors and particularly the decline over the past two years in tourist arrivals from Japan.

Liberty House filed for Chapter 11 bankruptcy court protection in March 1998. Since then, the company has closed some of its resort stores and changed some of its other operations.

Today's document says its department store sales dropped from $355 million in 1994 to $277 million last year.

Liberty House's local management issued a statement late this morning saying it was aware of the JMB plan and saying that the JMB plan has not been agreed to by the creditors.

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