Macy’s has been weighed down by a huge debt burden ever since it went private in a leveraged buyout for $3.7 billion six years ago. Losses mounted in the last six months, and Macy’s was forced to delay payments to vendors. Under his proposal, Tisch would have spent about $1 billion to increase his stake in the company to as much as 90 percent. Vendors were first heartened, then discouraged, by news of the Tisch plan. “I don’t believe in the tooth fairy and I don’t believe I’m getting a check on Monday,” said Bud Konheim, president of Nicole Miller, a dressmaker and a Macy’s supplier.
Many experts predict that the failed deal will leave Macy’s with little alternative but to seek Chapter 11 bankruptcy protection. As one bond analyst puts it, Tisch’s proposal “let the cat out of the bag that someone would have to put in a billion dollars to shore up the company.”
It was conceivable that the Tisch plan could be revived, but Macy’s creditors seemed reluctant to give the retailer much more time. As recently as two months ago, company chairman Edward Finkelstein was still defending the earlier management decision to take on so much debt. “America was built on debt,” he said then. But perhaps his department store will be dismantled by it.
