Liberty HouseU.S. Bankruptcy Judge Lloyd King has approved a settlement between the Internal Revenue Service and Liberty House, ending a battle over the retailer's back taxes.
back taxes capped
at $14 million
The settlement takes effect
mid-February; the bankruptcy
case could end by April
By Janine Tully
Under the settlement, Liberty House will be liable for a maximum of $14 million in back taxes. The settlement is expected to go into effect by mid-February.
"Today is a turning point in the 151-year history of our company," said John Monahan, company president and chief executive officer, after the court's ruling.
"I would like to extend my heartfelt gratitude to our customers and employees for their tremendous support and loyalty during this difficult period."
The order follows King's approval earlier this week of a final reorganization plan for the department store chain, over the objections of the IRS. The agency had sought to keep the nearly 3-year-old bankruptcy case open while the government completed an audit over the next year.
The IRS had been seeking an estimated $35 million in taxes from a group of companies that used to include Liberty House.
Chuck Choi, an attorney representing the Unsecured Creditors Committee, called the settlement "terrific news" for Liberty House creditors. It means "we'll get paid within the next month," Choi said.
Without the IRS issue resolved, creditors would not have received payments, he said.
"Given how complicated the case was, this quick resolution of all the issues was a pleasant surprise," Choi said.
The bankruptcy could wrap up as early as the end of April. Liberty House filed Chapter 11 reorganization in March 1998, listing $248.4 million in debts and $284.2 million in assets.
Under the approved plan for reorganization, two mainland venture capital firms will assume majority ownership from Chicago-based JMB Realty Corp. Monahan said the plan enables Liberty House to emerge as a "financially rock-solid, debt-free entity."
It also eases the concerns of nearly 3,000 Liberty House employees about their future with the company, he said.
"There's been a lot of teamwork among employees who have stuck with us through this process," Monahan said.
Since the bankruptcy, Liberty House has closed 24 stores. It now has 18 stores, including specialty stores and a store in Guam.