Campeau Gets Two More Weeks to Negotiate New Pact With Its Lenders

Troubled Campeau Corp. won two extra weeks Tuesday to work out a new lending agreement with a banking syndicate that has provided $2.34 billion in financing to its two big department store divisions.

A dispute between Campeau and the Citibank-led banking group had threatened to force Campeau’s Allied Stores and Federated Department Stores operations to seek protection from creditors in bankruptcy court within days. Campeau officials, however, have conceded that Allied and Federated still might file to reorganize under Chapter 11 of the U.S. Bankruptcy Code as early as this month even if it reaches new terms with its banks.

Campeau’s most pressing crisis was prompted by a Dec. 21 letter from Citibank asserting that the Allied and Federated lenders could force early repayment of the department store companies’ bank debt unless they could demonstrate their solvency. Citibank had set a deadline of Dec. 31.

The bank maintained that the Campeau units had fallen into technical default on their loans by failing to prove their solvency. Campeau has countered that it believes its big retailing units are complying with the loan agreement and are not in default.

Under the agreement announced Tuesday, the banks said they would give Campeau until Jan. 15 to satisfy their conditions and promised not to call in the Allied and Federated loans before then. As part of the agreement, however, Federated said it will pay off early a $250-million loan originally due April 30.