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Liberty House Attorneys in the Liberty House bankruptcy case are scheduled to return to court today to give details of a settlement that would turn over ownership of the kamaaina retailer to its lenders.
parties seek
settlement
approval
A judge hears details today
of a plan that gives ownership
of the retailer to its lendersBy Tim Ruel
Star-Bulletin
U.S. Bankruptcy Judge Lloyd King has set an afternoon hearing to discuss a settlement reached over the weekend between the lenders, a committee of unsecured creditors and Liberty House's current owner, JMB Realty Corp. Judge King must approve the settlement.
Under the agreement, Chicago-based JMB would lose its equity interest in Liberty House, but take a multimillion-dollar payout. The details of JMB's part of the settlement will be disclosed today, said Bruce Bennett, attorney for Liberty House management.
Another attorney familiar with the case said JMB and one of its subsidiaries would receive a total of $13.6 million in cash and notes, paid out of Liberty House's bankruptcy estate. The payments would not go directly to JMB, however, but into an escrow account where it could help pay claims by the IRS.
Also in the deal announced yesterday, Liberty House's more than 2,000 unsecured creditors would be paid 40 percent of their total $46 million claim in cash and another 50 percent in stock in the new company, according to attorneys.
The plan, which was being drafted yesterday in Los Angeles, is expected to closely resemble one previously proposed by the lenders in partnership with the committee of creditors.
In today's hearing, attorneys will also try to resolve an outstanding $35 million tax bill owed to the Internal Revenue Service -- a matter that was not part of the settlement.
Liberty House, which filed Chapter 11 reorganization bankruptcy in March 1998, could emerge nearly debt-free as early as the end of April, Liberty House President John Monahan said in a statement yesterday. The company would be valued at $190 million.
"There's very little question that Liberty House will survive," said Bennett.
The settlement agreement was announced at the start of a confirmation hearing yesterday, where Judge King was supposed to consider approval of the lender's former reorganization plan, which had been opposed by JMB.
If the lenders take ownership, they would likely sell the company, predicted Marty Plotnick, a local retail analyst. The companies are not in the business of running day-to-day operations of a department store, he said.
When asked if the new owners would sell Liberty House, Monahan declined comment.
It was unclear whether General Growth Properties Inc., the owner of Ala Moana Center where Liberty House is an anchor tenant, will attempt to buy the Hawaii retail chain. General Growth twice last year proposed an alternative plan in court in which it would buy the chain out of bankruptcy. Those plans were both withdrawn over concerns from the lenders and Judge King.
Executives from Chicago-based General Growth could not be reached for comment today.
The lenders, led by Bank of America, helped trigger Liberty House's filing for bankruptcy three years ago when they sued to replace the company's board of directors, citing defaulted loans. They later gave $50 million in emergency loans to Liberty House to support its reorganization.
Its current owner, JMB, acquired the retailer along with its former parent, Amfac Inc., in 1988.
Founded in 1849 as H. Hackfeld & Co., Liberty House is Hawaii's oldest and largest chain of department stores.
The retailer currently has 18 outlets, none of which would close under the settlement, Monahan said. He noted there would be no layoffs either.
Since 1997, Liberty House has trimmed more than 1,300 positions and closed 12 stores. A month before filing for bankruptcy, it laid off 136 workers. The company now has about 3,000 employees.
Liberty House's bankruptcy
When filed: March 19, 1998