Carter Hawley Hale paying a premium for loan to help company survive Chapter 11.Carter Hawley Hale paying a premium for loan to help company survive Chapter 11 Giant department-store chain Carter Hawley Hale Stores Carter Hawley Hale Stores was an American retailer based in Southern California. Known through its history as Broadway-Hale Stores and Broadway Stores, over time, it acquired other retail store chains in regions outside California home base, and became in certain retail sectors a Inc., operating under protection of bankruptcy law, is paying from 1.5 percent to 2.0 percent above the 9 percent prime rate for the $800 million worth financing it has secured from Chemical Bank of New York The Bank of New York, abbrieviated to BNY, was a global financial services company that existed until its merger with the Mellon Financial Corporation on July 2, 2007.[1] The bank now continues under the new name of The Bank of New York Mellon Corporation. , according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. records filed in U.S. bankruptcy court bankruptcy court n. the specialized Federal court in which bankruptcy matters under the Federal Bankruptcy Act are conducted. There are several bankruptcy courts in each state, and each one's territory covers several counties. here. One source close to the deal said the expensive money will "test" the Los Angeles-based Carter Hawley's ability to survive the bankruptcy. Carter Hawley, parent of the 43-store Broadway chain, is paying 10.5 percent on $250 million in debtor-in-possession financing Debtor-in-possession financing New debt obtained by a firm during the Chapter 11 bankruptcy process, Federal Bankruptcy Rule 4001 (c)(1). This financing is unique because it is secured, that is, it has priority over existing debt, equity and other claims. , and a rate of 11.5 percent on $550 million in accounts receivable financing Accounts Receivable Financing A type of asset-financing arrangement in which a company uses its receivables - which is money owed by customers - as collateral in a financing agreement. The company receives an amount that is equal to a reduced value of the receivables pledged. . Other big, credit-worthy companies can pay the prime, or as little as 6 percent for commercial paper to secure financing. The $2.86 billion Carter Hawley secured its debtor-in-possession financing Feb. 28 and its account receivable account receivable Any amount owed to a business as the result of a purchase of goods or services from it on a credit basis. Although the firm making the sale receives no written promise of payment, it enters the amount due as a current asset in its books. financing April 8, both from lead lender Chemical Bank and a consortium of lenders. Carter Hawley also owns the Weinstocks, Emporium and Broadway-Southwest stores. A company spokesman said the rates being paid by Carter Hawley, which filed for Chapter 11 on Feb. 11, are standard for a bankrupt concern. "The terms are standard for DIP financing and financing for companies in Chapter 11," said Carter Hawley spokesman Bill Dombrowski. As yet, Carter Hawley has only borrowed $452 million against its accounts receivables loan and hasn't touched the debtor-in-possession financing, Dombrowski said. A bankruptcy lawyer agreed. "I don't consider the interest rate that high," said Dean Rallis Jr., department head at Baker & Hosteller, McCutchen Black, a law firm based in Los Angeles. Interest rates in bankruptcy cases sometimes go as high as 18 percent to 20 percent, he noted. Attorney Leon Vickman, who represents the unofficial employee-shareholders committee in Carter Hawley's bankruptcy case, said his committee approved the financing arrangement because the matter had become "moot." Chemical Bank was the only willing lender and the argument was made in court that if Carter Hawley did not secure a loan soon, the company would have to close its doors at the end of April, Vickman said. Chemical Bank received a $17 million fee from Carter Hawley for arranging the loan, Vickman added. |
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