Olympia & York Gives Campeau Cash Infusion

Financially crippled Campeau Corp. today secured an emergency loan that will enable its department stores to pay debts but will force the company’s founder, Robert Campeau, to relinquish control.

Campeau’s problems, caused largely by obligations on its “junk bond” debts, had raised doubts about the future of his company and injected uncertainty into the $200-billion market in junk bonds, which are high-yield, high-risk securities used to finance takeovers and expansion.

Olympia & York Developments Ltd., which is providing the $250-million loan, also obtained the power to steer Campeau through a major financial overhaul that will feature the sale of its Bloomingdale’s chain.

Olympia & York, owned by Toronto’s Reichmann brothers, will be given three seats on a new 10-member Campeau board and the right to buy almost 16 million shares of the Canadian retail and property holding company.

The first portion of the loan from Olympia & York became available immediately, Campeau said in an announcement released by its Toronto headquarters.

The agreement calls for up to $150 million to be channeled to Campeau’s Federated Department Stores Inc. and the remainder to its Allied Stores Corp. division.

The money will allow the department store operators to meet interest payments now due on debts and to pay suppliers shipping merchandise ahead of the crucial Christmas shopping season.

Under the definitive agreement with Olympia & York, a new board of directors was appointed. The configuration of the board reflects the amount of power that Chairman Robert Campeau relinquished in the company he built.

Three members of the new board come from the Campeau group, three from Olympia & York and four represent minority shareholders.