How troubled is the situation at retail giant Carter Hawley Hale? It may be seeking finances possible only in dire straits.

How troubled is the situation at retail giant Carter Hawley Hale?

Retailing giant Carter Hawley Hale Stores Inc. apparently has retained a law firm specializing in financial restructuring and is exploring the possibility of "debtor-in-possession" financing, a type of cash backing sought by companies in Chapter 11 bankruptcy, sources have told the Los Angeles Business Journal.

Los Angeles-based Carter Hawley Hale last week refused to confirm or deny written statements submitted by the Business Journal concerning the possible financing. It also did not answer questions about whether it has retained Theodore Stolman, partner in the Los Angeles-based Stutman, Treister & Glatt, a nationally recognized bankruptcy and financial restructuring law firm.

"We don't comment on speculation," said Bill Dombrowski, spokesman for Carter Hawley Hale.

It is possible the company is just blocking out contingency plans or may be arranging a deal with its bond and note holders, and that no bankruptcy filing is forthcoming.

Financially troubled Carter Hawley Hale is the parent company of the 43-store Broadway-Southern California chain, and lost $26.0 million on revenues of $2.86 billion last year. It is also parent of the Broadway-Southwest, Emporium and Weinstocks department store chains, with a total of 45 stores.

Debtor-in-possession financing is fresh cash sought by companies in Chapter 11, and often the new lenders will be repaid first in relation to most other claims, said Joseph Eisenberg, nameplate partner in the Century City-based Levene & Eisenberg, a leading bankruptcy firm.

In Chapter 11, a company continues to operate, but stiff-arms creditors and vendors temporarily while it works out a business survival plan. The debtor-in-possession financing is sought to aid in a corporate financial turnaround.

According to one source, Carter Hawley Hale is exploring raising $250 million worth of debtor-in-possession financing, reportedly from Jeffrey Coats, senior vice president at General Electric Capital Corp.

Coats works out of GE Capital's Century City offices, but was in GE Capital's Stamford, Conn., headquarters last week.

GE Capital, led by Coats, recently provided $100 million of debtor-in-possession financing to Dallas-based National Gypsum, a construction material company in Chapter 11.

Coats and GE Capital last week refused to "confirm or deny" written statements submitted by the Business Journal.

According to one source close to the deal Jeffrey Chanin, principal in the Westside-based Chanin & Co. investment banking boutique, may help to line up cash for Carter Hawley Hale. Chanin, formerly an investment banker with Drexel Burnham Lambert Inc. in Beverly Hills, did not respond to calls or written inquiries last week.

Additionally, last week GE Capital told the Business Journal that it "is not a done deal" that it will buy $600 million of Carter Hawley Hale credit card receivables and operations. Carter Hawley Hale announced Jan. 22 that it has reached an "understanding in principle" to sell the operations to GE Capital.

"As far as I know, nothing's been signed so far," said Virginia Steinberg, a spokeswoman for GE Capital.

These moves by debt-burdened Carter Hawley come only a few months after the company sold its 26-store Thalhimers chain to May Department Stores Co. for $325 million. The sale reduced Carter Hawley Hale's debt load to $1.3 billion from $1.6 billion, and was hailed by bondholders for strengthening the department store chain's financial position.

Carter Hawley Hale pays a lot on its corporate IOUs: In fiscal 1990 it made interest payments of $174.2 million.

One junk-bond analyst last week said he did not expect a sudden bankruptcy filing at Carter Hawley Hale. "Carter is a highly leveraged retailer that is not going to blow up tomorrow. It doesn't look like anything is imminent there," said Craig Smith, director of research at R.D. Smith in New York.

Late last week, Carter Hawley Hale bonds, 12.25 percent bonds, due 1996, traded for 42 cents per dollar of face value, for a yield to maturity of 38 percent. The bonds are rated "B-minus" by New York-based Standard & Poor's, a rating considered "speculative, low grade."

The company's stock traded in the $3-a-share range, off slightly for the week. Company employees, through an employee stock ownership plan, own 45 percent of Carter Hawley Hale's stock.

The company's financial high-wire act began in the mid-1980s, when Chairman and Chief Executive Officer Philip Hawley fought off two separate takeover attempts by Ohio-based The Limited Inc. by taking on large amounts of debt.

Under the restructuring, Carter Hawley Hale retained 114 department stores, and transferred its specialty store division into a newly formed corporation named the Neiman Marcus Group.

Like many other department store chains, Carter Hawley Hale is finding the late 1980s and 1990s a very tough retail climate, one filled with discount chains and upscale specialty stores. A heavy debt load makes matters worse.

Last week, several local garment district denizens reported that their "factors" - banks that lend against receivables - were less than willing to lend against receivables from Carter Hawley Hale.

"Several factors are not approving Carter Hawley Hale for credit," said Steve Wasserman, nameplate partner with Tarzana-based Wasserman, Comden & Casselman, which serves the apparel industry. "I am talking about factors and manufacturing clients I have talked to directly, not what I have read in newspapers."