 Liberty House shelves Waikiki sublease plan
By Andrew Gomes
Advertiser Staff Writer
In a shift that could affect the outcome of Liberty House’s nearly 3-year-old bankruptcy case, a judge yesterday allowed a group of creditors to reverse their previous opposition to a reorganization plan that would bring the kama‘aina retailer out of Chapter 11.
Despite objections from Liberty House’s Chicago-based owner, bankruptcy Judge Lloyd King approved requests by Nordstrom and the owners of Pearlridge Center, Kahala Mall and Aloha Tower Marketplace to change their votes to accept the plan.
The reversals improve the chances of the court confirming the plan, which would issue a group of lenders $130 million in new Liberty House stock, and satisfy $40 million in claims primarily by paying creditors 40 percent in cash and 50 percent in stock.
The plan is proposed by the lenders, a committee of unsecured creditors and Liberty House management.
Last month a majority of creditors voted in favor of the plan, but not enough unsecured creditors in two key classes — mostly vendors and merchandise suppliers — supported the plan to constitute class acceptance. The result was a setback for plan proponents — a setback that has now been erased by the recast votes.
The shopping center owners, according to court filings, decided to change their votes after Liberty House clarified that it would keep its stores at the malls open.
Nordstrom, which had previously argued that the plan undervalued Liberty House assets, petitioned the court to change its vote after it resolved a dispute over the amount of its claim.
Together the four claimants hold $10.9 million in claims, more than 50 percent of the total value of about $20 million in claims held by roughly 2,000 unsecured creditors.
Daniel Murray, an attorney representing Liberty House owner JMB Realty Corp., suggested that Nordstrom’s vote may have been bought by Liberty House because Nordstrom’s motion to change its vote was based on settling the disputed amount of its claim.
Liberty House counsel Bruce Bennett said only $20,000 of Nordstrom’s $4.5 million claim, involving about 600 pairs of shoes, was disputed. Nordstrom settled the dispute by accepting half, $10,000.
King said there was nothing to demonstrate improper motives on behalf of anyone wanting to change their vote.
"This is not some rare, unusual emergency," he said. "Vote changing happens all the time."
Creditor preferences will be one of several issues the court will consider when it decides whether to confirm the retailer’s reorganization plan. It must also determine whether the plan is feasible, fair and in the best interests of creditors.
A confirmation hearing is set to begin Jan. 22, and is expected to last from three to five days.
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