NEW YORK — Now it’s time for R.H. Macy & Co.’s shareholders to be heard.
A group of common and preferred shareholders, saying no one group is looking out for their interests in the Macy’s Chapter 11 reorganization, has asked Bankruptcy Judge Burton R. Lifland to sanction an official committee of equity security holders.
However, working capital banks are trying to block the formation of such a committee on the grounds that the group cannot realistically expect a payout and the committee would only drain additional fees from the retailer.
The 325 common shareholders and 16 preferred shareholders, known currently as the Ad Hoc Macy’s equity committee, acquired Macy’s common stock at $10 a share in the retailer’s 1986 leveraged buyout.
In their motion, the shareholders said that “it is only through an equity committee that the stockholders will have a representative whose sole fiduciary duty” will be to safeguard the best interests of equity holders.
Although they concede that other creditors may consider their equity claims “out of the money,” the shareholders said the retailer recently told the court that its value has been increasing since the Chapter 11 filing “and continues to increase.”
Responding to the shareholders’ call for official committee status, the banks told Judge Lifland in court papers that the committee should not be formed because there is not enough money to go around.
“There is simply no possible scenario or realistic reorganization value for Macy’s under which a recovery for the holders of Macy’s common shares might be seen as remotely feasible,” the banks said.
Macy’s working capital banks are senior secured creditors that are high on the priority list in any Macy’s reorganization plan.
Macy’s common shareholders, at the bottom of any payout order, would be in line to
receive a payout only if Macy’s was valued at “no less than $5.3 billion,” the banks said, a level that would “exceed by over $1 billion even the most inflated estimate of Macy’s reorganization value.”
Under the plan of reorganization proposed by Macy’s last week, creditors would receive $3.6 billion in value, and possibly more later.
Related Articles
You May Also Like
The banks claim that because there is no chance of a $5.3 billion valuation, and, therefore, no chance for shareholders to realize a recovery, no official equity committee should be formed.
Judge Lifland will hear arguments on the motion on Thursday.