Heck's sees light at end of bankruptcy tunnel - discount store chain

Discount Store News, August 7, 1989

Heck's Sees Light at End Of Bankruptcy Tunnel

NITRO, W.Va. -- Heck's faces one last hurdle before emerging from Chapter 11 bankruptcy and expects to clear that by mid-August.

The hurdle is a Bankruptcy Court stipulation that it must secure an $8 million line of credit, said chief financial officer Maarten Hemsley. Heck's is confident that it will succeed because the Hallwood Group, New York merchant bankers that have been aiding Heck's, has agreed to guarantee the line of credit, if necessary, Hemsley said.

Last month, Heck's met two of three conditions the court laid down: it established a $20 million cash pool to pay creditors and got both creditor and court approval to transfer assets from its Maloney's chain to Heck's.

When it declared bankruptcy in March 1987, Heck's operated about 140 stores; it now runs 55. Of the 85 stores closed, Heck's let about 12 revert to landlords when unable to find buyers for the leases, Hemsley said. The bankruptcy code permits such an escape from lease obligations.

A lot of local users took over the balance, Hemsley said. No big chain took over a major block of stores.

Rose's Stores, Henderson, N.C., took just one store, he said, and Value City, Columbus, Ohio, took just two. Some stores were converted to other retail uses, such as automotive showrooms, he said.

Heck's raised between $40 million and $50 million in closing the 85 leased and company-owned stores, Hemsley said, with the money earmarked to repay creditors and mortgage holders.

From its 55 stores, Heck's expects to generate sales of $220 million in the fiscal year ending next February, Hemsley said. The chain employs about 2,000 persons.

Heck's has applied for its stock to be listed on NASDAQ once it comes out of bankruptcy, Hemsley said. The New York Stock Exchange delisted Heck's last fall, and it now trades on the Midwest Exchange at about 31 cents a share.

Both bank and trade creditors ultimately will own about 70 percent of Heck's, Hemsley said, while the Hallwood Group will own about 15 percent. Old stockholders and Heck's management will split the remaining 15 percent.

Heck's also reported financial progress during its first quarter ended May 27, 1989, with losses declining faster than sales.

Sales from 55 stores slumped 47 percent to $46.9 million in the 1989 quarter from $88.9 million from 118 stores in the same period of 1988. Net losses decreased 81 percent to $3.1 million from $16.8 million.

Coal miner strikes in Heck's trading region hurt sales during the 1989 period, Hemsley said. Nonetheless, Heck's again is sponsoring this September's 19th Annual Sternwheel Regatta, to be held in Charleston, W.Va. Lucite, a major Heck's vendor, is joining the discounter in sponsoring the 10-day event that draws about 1 million visitors.