Liberty House begins
paying vendors

The retailer plans to send
out $7.5 million this month

Tim Ruel
Star-Bulletin

The check is in the mail this week for many of Liberty House's 1,600 vendors as the kamaaina retailer finally begins to pay off its creditors.

"By and large, the initial cash payments will be made by the 31st of March," said John Monahan, president, chief executive and director of Liberty House.

The 1,100 vendors owed $5,000 or less since the company filed for Chapter 11 bankruptcy protection in March 1998 will be paid off in full by the end of the month, Monahan said. Meanwhile, 500 vendors owed more than that will receive a check for 40 percent of their total claim, as well as a five-year note to pay off another 50 percent.

In all, Liberty House will pay $7.5 million to vendors this month, Monahan said.

He acknowledged the bankruptcy has been a long one for the vendors and everyone involved, but said the company has emerged nearly debt-free and is ready to move on.

The report met with a mixed reaction among some vendors.

Liberty House is one of the top five customers of Kakaako-based Scott Hawaii, which sells sandals to the retailer and has been owed $11,000 since March 1998.

"Anytime there's $11,000 out there, it's nice to have," owner and President Steve Scott said.

Scott said he was initially irritated when Liberty House first filed, since he had just sent over a shipment of sandals a week before, and has been waiting ever since for the money. But, it's worth it to keep Liberty House around, particularly since it has outlets in all of Oahu's major malls.

"They continue to be a good customer, a viable outlet for us," Scott said.

That sentiment was shared by Leighton Lam, owner of Leighton Lam Designs Inc., which has been owed $8,000 by Liberty House, or about a month's worth of sales for the jewelry manufacturer.

"To lose one month of sales was very forgivable, if it meant the store would stay open," Lam said.

Lam has been in business with Liberty House for the past 15 years, and said the store's advertising, promotion and sales abilities have helped him make a name for his brands on the local market. Moreover, he said Liberty House has done well at keeping him posted about bankruptcy developments and when he would be paid.

Among those who are not so thrilled with this week's payouts is Karon Chang, who co-owns Jeff Chang Pottery & Red Door Gallery, which is owed $7,000.

Beginning in 1977 and up until the filing, Liberty House had been a great customer, taking 60 percent of the company's wares, which include works of 300 local artists, Chang said.

"They were proud of us," she said. "We were an important part of their gift department."

In 1988, Liberty House's owner, Amfac Inc., was bought out by JMB Realty Corp. of Chicago, which later surprised local vendors by filing for protection from its creditors. Liberty House should have cut back on its orders just before filing bankruptcy to spare some of the pain, Chang said.

"We're a little bit old-fashioned," Chang said. "It's not so much what you do, it's how you do it."

Since the bankruptcy, Chang's company has stopped doing business with Liberty House.

"We actually had one check in hand and it ended up bouncing," Chang said.

Her company has survived in part because it had just opened its own 1,600-square-foot gallery in Kaneohe before the filing, and was able to pick up Nohea Gallery in Waikiki as a customer. Being fiscally conservative and careful about bills helped as well, she said. More recently, the company expanded to outlets in Windward Mall and Pearlridge, taking on nine more employees, including her 22-year-old son, Corey Chang.

"Like most entrepreneurs, we're fairly quick on our feet," she said.

To Lam, Liberty House's filing served as a welcome wake-up call to Hawaii's vendors, which had been getting used to having success with little or no effort.

Liberty House's bankruptcy was, for many, a reminder of Hawaii's economic downturn in the 1990s, and has helped many businesses become more competitive.

That is extremely important, Lam said, because the retail environment in the state has changed so much, with competition from large mainland companies like Wal-Mart, Costco and Home Depot.

"It just seems the 'Made in Hawaii' image has grown since then," Lam said. He praised Liberty House for helping that happen, by becoming the central location in the state for Hawaii vendors to sell their products to residents and tourists alike.

"Our relationship with the vendors has always been excellent throughout the bankruptcy," said Monahan. "They've been extremely supportive."