Carter Hawley Hale Stores took another step to cut its burdensome debts Tuesday by reaching an agreement in principle to sell its credit card business to General Electric Co.
The deal would provide Carter Hawley, parent of Broadway-Southern California department stores, with about $50 million in cash while also removing roughly $600 million in debt from its balance sheet.
Analysts who follow Carter Hawley applauded the announcement. "Carter Hawley Hale was more than over-leveraged (with debt) and anything they can do to reduce their leverage is good for their shareholders and bondholders," said Edward Weller of Montgomery Securities.
Separately, the company announced that H. Michael Hecht, chairman and chief executive of the Broadway-Southern California, will also take over as president of Carter Hawley. Hecht will replace Waldo H. Burnside, 62, who is retiring from the No. 2 job at Carter Hawley effective Feb. 15. Burnside will remain a director.
The proposed deal with GE, expected to be completed by late April, would cut Los Angeles-based Carter Hawley's debt to about $700 million.
Another big and heavily indebted retailer, R. H. Macy & Co., announced a similar deal with Stamford, Conn.,-based GE in October. Under that agreement, GE would assume $1.5 billion of Macy's debt and pay the company $100 million.
For GE's General Electric Capital Corp. unit, the acquisitions mark a major expansion of its business managing retailers' credit-card accounts. It already services 37 million credit-card accounts for more than 200 retailers in North American and Europe, including Montgomery Ward.
The latest deal would give GE responsibility for Carter Hawley's 6.5 million credit-card accounts.
Bill Dombrowski, a Carter Hawley spokesman, said store customers "will not see any change" in their bills. Customers' credit cards will continue to carry the names of Carter Hawley's four department store divisions: Phoenix-based Broadway-Southwest, the San Francisco Bay Area's Emporium chain and Sacramento-based Weinstocks, along with Broadway-Southern California.
In a previous move to slash its debt, Carter Hawley last month sold its Southeastern chain, Thalhimers, to May Department Stores of St. Louis for $317 million. Carter Hawley lost $26 million last year and came under criticism for paying its suppliers slowly, but credit analyst Richard Hastings, senior retail credit analyst with Solo Credit Service Corp., said the company has speeded up payments in recent weeks.
In naming Hecht president, Carter Hawley left open the job of chief operating officer that has been held by Burnside. There are no plans to fill that position.
Dombrowski acknowledged that Hecht would be "a candidate" to replace Carter Hawley's current chairman, Philip M. Hawley, upon his anticipated retirement in 1994. He said, however, that Hecht was "not a designated heir apparent."
Hecht, 51, joined Carter Hawley in 1975. He was named executive vice president of the parent company last year and since 1986 has been chairman and chief executive of the Broadway, which is the biggest department store chain in Southern California and Carter Hawley's top division.