Liberty House
gets extension on
reorganization

New cooperation between
the sides clears the way for
the holiday season

By Peter Wagner
Star-Bulletin

Christmas is in the air at Liberty House, which has won a four-month reprieve to file its bankruptcy reorganization plan.

The extension, agreed upon by creditors and granted by U.S. Bankruptcy Judge Lloyd King yesterday, will allow the company to concentrate on its critical holiday sales.

But the deal, worked out over earlier objections, also could signal new cooperation in the contentious case to bring the retailer out of Chapter 11 bankruptcy.

"It really was very good news in court," said Liberty House President John Monahan. "There are still a lot of things that have to happen but any time you have things happening consensually in a case like this, it's positive."

The extension moves the filing deadline from Nov. 13 to Feb. 28.

Liberty House sought the extension--its second since filing for bankruptcy in March--so it could devote its efforts to sales during the holiday shopping season.

Creditors headed by Bank of America had opposed the new deadline, citing rising costs and a prolonged bankruptcy. Legal and consulting fees charged to the bankrupt company totaled nearly $4 million at the end of September--seven months into the case.

But the lending group, owed more than $150 million, yesterday agreed on condition all parties sign off on the plan before it is filed.

Liberty House in earlier filings expressed concern that multiple reorganization plans would end up on the table, potential conflicts that could prolong the bankruptcy.

"We're all on the same page now," said Liberty House attorney Bruce Bigelow.

"We're working towards a common goal."

Liberty House yesterday also confirmed that the Bank of America group has offered to forgive some or all of its debts in return for an interest in the company.

The proposal is drawing little reaction from the company or its attorneys.

"They haven't made a formal proposal," said Liberty House attorney Bruce Bennett. "It would have to be characterized as very preliminary."

Attorneys on both sides of the case say the exchange of debt for equity in a company is common in Chapter 11 bankruptcies. They noted that Hawaiian Airlines offered stock to creditors in its 1993 Chapter 11.

Chapter 11 bankruptcy protects a company from its creditors pending filing and approval of a reorganization plan.

The plan must detail how the company will restructure and repay its debts.