Campeau Scrambles for $250 Million to Bail Out Stores

Campeau Corp.’s huge U.S. retailing interests hung in the balance Thursday as the company scrambled to secure a $250-million loan to make a payment today and to bail out its department stores for the crucial Christmas season.

Meanwhile, agents for many clothing manufacturers said they were withholding shipments to Campeau stores--which include Bloomingdale’s, Burdines, Jordan Marsh and Abraham & Straus--as they wait to see whether Campeau can pay for the merchandise.

That raised the specter of bare shelves and racks during the critical holiday selling period, something that would further jeopardize the stores’ shaky condition. The fourth quarter usually accounts for about one-third of a retailer’s sales and half its profits.

Campeau Corp. said late in the day that it was in 11th-hour negotiations and would make a statement before the opening of the Toronto Stock Exchange this morning.

Sources in the retail industry said they expected the company to announce that it has won investors’ backing for a financial overhaul and a vital $250-million infusion from Olympia & York Developments Ltd., a big Canadian real estate firm that is part owner of Campeau.

Campeau’s travails--which grew out of his hard-fought $6.6-billion purchase of Federated Department Stores last year--have already forced it to put up for sale the fashionable Bloomingdale’s chain, revered by Toronto entrepreneur Robert Campeau as the crown jewel of the deal. The Olympia & York loan was widely viewed as being necessary to prevent a fire sale of other assets as well.

Net Loss Reported

Trading in Campeau stock remained on hold Thursday at the company’s request. Trading was halted Wednesday, after the stock fell by $2.80 to $11.21 a share.

Campeau’s woes prompted a widespread selloff in the market for junk bonds Wednesday, and on Thursday yields on the high-risk investments, which have fueled the wave of buyouts and takeovers, edged down further.

Also Thursday, Campeau reported a net loss for the second quarter of $124 million, a jump from the $109 million net loss for the previous year’s quarter. For the first half, the company’s net loss of $191 million contrasted with earnings of $64 million in the comparable period in 1988.

The companywide report followed Wednesday’s statement of continued hefty losses for the Toronto real estate development firm’s two department store divisions--Federated Department Stores and Allied Stores.

More significant than the losses were acknowledgments in filings with the Securities and Exchange Commission that the two retailing companies do not have enough cash to cover their day-to-day costs.

In addition to normal operating expenses, Allied said it has $50 million in interest payments due to bondholders today and cannot make the payment itself.

Federated also faces a refinancing deadline of its own. By midnight Thursday it was to have stated how it planned to refinance a $400-million bridge loan from First Boston Corp. and two other creditors.

Big Hurdle Faced

If no deal is reached, First Boston and the two other lenders will receive 7% of Federated’s stock, now held in an escrow account.

If the Olympia & York loan goes through, as expected, that company’s share of Campeau Corp. will probably rise to about 35% percent from about 25%. Moreover, Chairman Robert Campeau’s current controlling interest of more than 50% would fall to about 46%. Observers speculate that the wealthy Reichmann brothers who control Olympia & York might gain control of Campeau’s board in exchange for bailing out the company.

Even if it secures the $250 million, Campeau faces a bigger hurdle come January when $800 million in debt comes due.

An executive in the Glendale office of Heller Financial Inc., an agent for about two dozen clothing manufacturers that do business with Campeau stores, said the apparel industry is approaching the crisis “with trepidation.” Heller is one of many large “factors” that buy receivables accounts from clothing makers at a discount and then collect from retailers.

“They have been borrowing from Paul to pay Peter,” said Mel Langer, a senior vice president at Heller Financial. Since Wednesday, his company has been holding all orders slated for Campeau stores. And even if the $250-million loan is secured, Langer said he expects to remain in a holding pattern for a time.

“My first question is, is it enough?” he said. “How long is it expected to tide them over?”

Bernard Lax, president of Louie Bernard Inc., a Los Angeles clothing manufacturer, said companies with orders slated for Federated and Allied chains are extremely nervous.

“A few people are having major cows around the city at this point,” he said. “If I had $100,000 to $200,000 of merchandise sitting at my back door and I couldn’t ship it, I’d have a cow.” Luckily, he added, “I don’t.”

Absent from recent discussions about Campeau’s troubles has been the fate of Ralphs Grocery, which the development firm acquired as part of the Federated acquisition and then set up as a stand-alone corporation.

Industry sources said Thursday that Campeau’s current struggles will have no effect on the Compton-based supermarket company, which, although mostly owned by Campeau, has its own debt structure and still has $100 million of untapped credit available to it.