Carter Hawley Suppliers See a New Beginning

Last week Mark Schimel was so furious with Carter Hawley Hale Stores and so worried that it would go into bankruptcy that he flew from New York to Los Angeles to personally demand the $15,000 he says the company owes him. All he got, he says, was a lot of runaround.

This week Carter Hawley actually went into a Chapter 11 bankruptcy reorganization. So would Schimel, president of a firm that makes earrings and other young women’s accessories, do business with Carter Hawley again?

You bet. “I’d have no reservations at all,” he said.

Like many other suppliers to Carter Hawley, the parent of the Broadway-Southern California department stores, Schimel regards the company’s new status in bankruptcy as a chance for it to start anew. Desperate for business amid the current recession, these suppliers are willing to give the big retailer another chance--even suppliers that were stung by Carter Hawley’s late payments in the past.

One of the main enticements is that Chapter 11 proceedings make it easier for debtors to get new loans--money that’s used to pay for new merchandise. In Carter Hawley’s case, the company received a bankruptcy judge’s approval Wednesday to use $150 million in fresh financing from Chemical Bank.

So, despite bitter feelings and some lingering reservations about dealing with Carter Hawley, most suppliers now appear ready to resume shipments.

“Chapter 11 is like getting your system flushed out,” explained Barry Sacks, chairman of Chorus Line, the Los Angeles firm that makes All That Jazz dresses.

“You (debtors) get to put all your previous debts on hold. . . . A dollar that comes in now from operations is a dollar available to pay for fresh bills.”

From Sacks’ point of view, Carter Hawley “has never been in better shape.”

Still, suppliers say, they will keep a close watch on how quickly the company pays its bills.

“If they don’t pay their bills on time, they’ll get cut off. Period,” said Sacks.

There also are other ways suppliers will tighten the reins on Carter Hawley stores. Sacks, for example, said if the company suddenly boosts its orders from, say, $100,000 a month to perhaps $500,000, he’d go slow in granting credit for the extra business.

Instead, he might increase business with Carter Hawley gradually, to make sure it could pay for the additional orders.

“I want to crawl with them before we walk with them,” Sacks said.

Jerome Burger, general credit manager of Craftex Creations Inc., a New York lingerie maker, said if new Carter Hawley orders come in, his firm probably will insist on payment in 15 days after delivery instead of its past practice of 30 days.

But there’s no question, he said, that Craftex will ship to Carter Hawley stores--even though Carter Hawley went into Chapter 11 owing Craftex an estimated $20,000. “Business isn’t good,” Burger said. “There’s a recession. Everybody is looking for an outlet to ship their goods to.”

Carter Hawley spokesman Bill Dombrowski said that since the company’s new financing was approved, suppliers have been calling at a rate of about one every 20 seconds to get information on how they can resume shipments. “They need us as much as we need them,” he said.

Company Chairman Philip M. Hawley was in New York on Thursday, trying to comfort suppliers and win them back.

Not everyone, though, is willing to go forward with Carter Hawley. Art Wolf, president of J&A; Sales in Los Angeles, which represents apparel manufacturers, took a quick poll Thursday with some of the firm’s clients. Five said they planned to resume business with Carter Hawley, while two said they would hold off.

Part of the concern, Wolf said, is that Carter Hawley still is being run by “the same talent that brought them into this wilderness.”

Others expressed concern that Carter Hawley’s $150 million in interim bankruptcy financing won’t be enough to revive the company if too many suppliers insist on tough credit terms. If Carter Hawley runs into further problems, some fear, it could go out of business.

For their part, creditors may have to wait years before getting paid for bills due before Carter Hawley went into Chapter 11, and even then they probably will collect no more than a fraction of what they are owed. Under bankruptcy law, new bills and interest charges for new loans take priority.

Schimel, the accessories maker, fumes when he talks about Carter Hawley’s overdue debts to his company. When Carter Hawley, in his view, dragged its feet in paying its bills, “I hated them. I wanted to kill them. I never wanted to see them again.”

Now, Schimel says, there’s only one way to exact “revenge”: “Sell them a lot and make money.”