More than a year after seeking bankruptcy protection, Federated Department Stores Inc. and Allied Stores Corp. said yesterday that they would attempt to repay creditors with a combination of cash, bonds and stock in some of America's best-known department stores.
The long-awaited reorganization plan filed yesterday calls for consolidating about $8.2 billion of claims held by thousands of banks, bondholders and suppliers to just $2.8 billion by February 1992. That is about the same time that the retailers would merge under the Federated umbrella and sell stock to the public.
For the moment, the retailers -- which own nine department-store divisions, including Abraham & Straus, Bloomingdale's and Stern's -- don't expect to close or sell any stores beyond several outlets already targeted for disposal, such as the planned sale of 20 stores in Florida.
"The hard part just started and it will be much harder than people think," said retail analyst Kurt Barnard. "They want to issue stock. Well, somebody has to agree with what the whole shebang is worth."
Under the proposal, the retailers' unsecured creditors -- a large and divergent group that includes many apparel suppliers -- would be fully repaid, with some portion to be paid in cash and the rest in interest-bearing notes over a period of about three years.
The plan "will provide a solid capital structure for the company to move forward," said Allen Questrom, Federated and Allied's chairman andchief executive, who joined the retailers shortly after they filed for bankruptcy protection in January 1990.
Despite having filed the plan with bankruptcy court in Cincinnati, where the retailers are headquartered, Federated and Allied face numerous obstacles before they can successfully recover from bankruptcy. That's because the retailers must still negotiate repayment terms with a raft of creditors.
They must still file a "disclosure statement," a key procedural step in bankruptcy court, which has to be mailed to all the creditors for a vote, according to Lawrence Gottlieb, a partner in Siegel, Sommers & Schwartz, which represents some of Allied's unsecured creditors. This procedure could take several months, he said.
Not all creditors seemed likely to be pleased. "Federated bondholders are not satisfied with [the plan]," said Joseph Kelly, an attorney with Dow, Lohnes & Albertson. "I'd be surprised if there was anything in there that took care of us."