Management Buyout Of Bon Marche Seen As `Possibility'
Bon Marche executives today said the Northwest's largest retail chain is not for sale, but Bon chairman and chief executive officer William Fix did not rule out the possibility of a management buyout of the 40-store chain.
At a morning press conference, Fix responded to a question about the likelihood of a management buyout of The Bon by answering, ``Well, that's always a possibility.''
He would not elaborate, and Robert Mang, The Bon's chief operating officer and president, later said that it would be up to the bankruptcy court now controlling the financial operations of Allied Stores Corp., the Bon's parent company, to decide if The Bon will be sold. Both Mang and Fix say they have heard of no plans to sell, despite speculation by analysts.
This morning was the first time The Bon's top executives have responded to questions about the financial turmoil caused by the Chapter 11 bankruptcy filing yesterday by Allied and Federated Department Stores, the two chains owned by Campeau Corp. of Toronto.
The two executives said many times that it would be ``business as usual'' at The Bon, there would be no layoffs, that all commissions and wages would be paid, and that all credit-card operations would remain intact. Mang also said that he has talked with many of The Bon's
largest suppliers, all of whom say they will be shipping merchandise on schedule for the spring.
Fix said that The Bon's sales are up 14 percent in January compared to January a year ago, and that The Bon accounts for 33 percent of Allied's earnings and 23 percent of its sales.
Yesterday's filing left Bon store managers, employees and suppliers with questions about their future as Campeau works out a way to pay off $8 billion in debt. Ironically, many of the retailers, such as The Bon and Bloomingdale's, owned by Federated Department Stores, are healthy, but Campeau is not because of its staggering debt.
``I can't really say I feel resentful,'' said Fix, commenting on Allied's bankruptcy filing. ``We're a little surprised it happened because we're part of a great company. We feel this is a distraction, certainly not for very long.''
It was the largest bankruptcy filing by an American retailer.
Court filings released today show Campeau Corp.'s two department store subsidiaries owe billions of dollars to a range of unsecured creditors, mostly banks and Wall Street firms that helped finance the retailing giant's expansion.
The filings showed total assets of $9.1 billion and liabilities of $7.7 billion for the units of the Canadian company.
Some local suppliers said The Bon and other Campeau retailers owe them money that could be hard to collect now that the retail chains are in Chapter 11. Suppliers said they are confident that they'll be paid for goods and services delivered after the bankruptcy filing; it's goods and services delivered before that worry them.
``Not all of the checks arrived in time,'' said Tony Margolis, sales and marketing vice president for Generra, a major Seattle-based sportswear manufacturer. ``We were able to pick up some of the checks in person and cash those. Others were mailed and we either didn't have a chance to cash them or they haven't arrived yet.''
Carol Sanger, a spokeswoman for Federated and Allied, said there were no plans to lay off employees. But she cautioned, ``We cannot be assured, as we go forward, what form the reorganization will take.''
The Federated and Allied stores would take cost-cutting measures, Sanger said, but she declined to describe them.
The Chapter 11 filing allows the retail chains to stay in business while Allied and Federated work out a plan to reorganize their finances. Much of Campeau's debt stems from its $3.4 billion acquisition of Allied in 1986 and the $6.6 billion purchase of Federated in 1988.
No retail executives or analysts seem to think that The Bon will shut its doors, though the highly leveraged mergers and acquisitions that have hit the retail industry in recent years are causing department-store casualties elsewhere.
``My sense is that this is all for the better,'' said Jim Nordstrom, co-chairman of Nordstrom, the Bon's major competitor. ``The Bon seems to have come through the last six months very well, considering what they've been through.''
For newspapers in the Puget Sound region, the bankruptcy filing causes concern. The Bon is the biggest retail advertiser in The Seattle Times, the Seattle Post-Intelligencer and the Morning News Tribune in Tacoma.
Several analysts speculated that The Bon will go on the auction block and fetch a price that would help Campeau escape from its crippling debt.
The Bon had estimated sales last year of $640 million.
About half of The Bon's 4,500 employees are members of one of eight different unions. Joe Peterson, president of the largest, Local 1001 of the United Food & Commercial Workers, which represents 1,200 sales clerks in the Seattle area, said he doesn't expect any significant changes for employees to come out of the bankruptcy filing.
And there were no apparent differences at the downtown store yesterday. Power tools whined on the first and second floors, their sound carrying to the third floor, as work on a remodeling project continued.
Shoppers roaming aisles in search of bargains seemed oblivious to the news of the Chapter 11 filing.
Judy Willott of Bainbridge Island said she hadn't heard the news but wasn't terribly concerned. ``The Bon has always been here. I just imagine it always will be,'' she said.
The fact that Campeau Corp. founder Robert Campeau is a fellow Canadian was not lost on a retired business owner from Vancouver, B.C. He said both U.S. and Canadian governments share some responsibility for allowing corporate ``vices,'' such as the use of junk bonds in huge deals. The risky bonds were used to finance Campeau's debt.
``A small businessman has to sign his life away for a loan, but then the banks give guys like this these kinds of loans,'' the man said. ``It's endangering both our economies.''
Employees at the Northgate store said they hope the Chapter 11 filing will provide Campeau with the breathing room it needs to remedy its financial problems.
``Everybody knew this was going to happen,'' said an employee who declined to give her name. ``I think most people are relieved.''
Like many sales clerks, Gina Johnson believes the chain will be sold to a corporation that will be able to solve the financial woes.
``I haven't heard anybody say they are really worried about their jobs,'' Johnson said. ``I'm not.''
But several clerks said store and department managers are worried. Clerks said many managers fear new owners would make changes that could put them out of work.
``Management is much more worried than salespeople,'' a clerk said.
-- Times business reporters Tim Healy, Vince Stricherz, Bill Dugovich and Robin Updike contributed to this report, which also includes material from the Associated Press.
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About The Bon
-- Headquarters: Seattle
-- Stores: 40 in Washington, Idaho, Montana, Oregon, Utah and Wyoming
-- Employees: 4,500
-- Size: Largest department-store chain in the Northwest and third-largest division of Allied Stores Corp., a subsidiary of the Campeau Corp.
-- Estimated 1989 sales: $640 million
-- Estimated 1989 operating income: $75 million
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Chapter 11:
How it works
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This chapter in the Federal Bankruptcy Act provides for court-supervised reorganization of debtor companies. Here are the steps:
1. A company files
-- When it can no longer pay creditors.
-- When it expects liabilities it cannot pay, such as damage awards from a lawsuit.
2. A judge issues a stay
-- Creditors cannot press suits for payment.
-- Debts are frozen (secured creditors can ask the court for a hardship exemption).
-- Company's daily operations continue.
-- Major spending must have judge's approval.
3. Unsecured creditors form a committee
-- That way, they deal with the debtor as one entity.
4. Court, company negotiate reorganization plan
-- Can take months or years.
5. Creditors must approve
-- A majority must approve, as well as creditors who are owed two-thirds of the debt.
6. Judge must approve
7. Reorganized company emerges