Campeau May Come to Terms With Lenders

Campeau Corp., scrambling to avoid defaulting on $2.34 billion in loans to its department store divisions, said Monday that it expects to work out an agreement with its banks within a few days.

But even if Campeau comes to terms with its lenders, the company still will face a cash crunch that could force its vast department store operations to file for bankruptcy court protection as soon as this month, said Campeau spokeswoman Carol Sanger.

Sanger said progress was made in talks over the weekend between Campeau and a banking group led by New York’s Citibank. She said that negotiations involving the bank debt for Campeau’s Allied Stores and Federated Department Stores units will resume today in New York.

New pressure was put on Campeau late in December when the Citibank group notified the company that its department store divisions failed to comply with a loan requirement to demonstrate that they remain solvent and capable of covering their debts. The banks said that if the problem was not settled by Dec. 31, they could order Allied and Federated to speed up payment of their loans, a move that almost certainly would force them into bankruptcy.

Although that deadline passed over the weekend, the Citibank group and Campeau are continuing talks in the expectation of reaching an agreement shortly, Sanger said. A Citibank spokesman declined to comment.

Toronto-based Campeau is struggling under the burden of more than $7 billion in debt stemming from its acquisitions of Allied in 1986 and Federated in 1988. As part of a reorganization plan, Campeau is trying to sell its 17-store Bloomingdale’s chain and to buy back the company’s junk bonds at a discount from investors.

Last month, however, the company warned that it might have to file for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code early this year to gain more time to work out its problems.