Campeau Wins 4-Day Loan Extension

A group of banks agreed Sunday to give Campeau Corp. a four-day extension on a key financial deadline, but sources close to the troubled Toronto-based company said it would still file for bankruptcy soon for its debt-laden U.S. department stores.

The lenders, led by Citibank, earlier granted a two-week extension for the Canadian company to prove that it was restructuring and would be able to repay $2.34 billion in loans. That period was to end Monday. But Campeau “asked for an extension and the banks granted that extension,” said a source, who spoke on condition of anonymity.

Despite the extension, however, another source said Campeau still intends to seek protection under Chapter 11 of the U.S. Bankruptcy Code, a move that would rank as one of the most dramatic business collapses in U.S. history.

The bankruptcy filing would give Campeau’s Federated Department Stores and Allied Stores divisions--the nation’s second largest group of department stores--extra time to reorganize operations without interference from creditors.

The Campeau operation includes Jordan Marsh, The Bon Marche, Maas Brothers and Stern’s department store chains in the Allied group and Bloomingdale’s, Burdine’s, Lazarus, Abraham & Straus and Rich’s chains in the Federated group. (Campeau also owns Ralphs, a 143-outlet Southland grocery chain that is not part of the company’s troubled division.)

The expected collapse of Campeau’s empire comes less than 18 months after the company built by Robert Campeau won a drawn-out bidding war for Federated Department Stores by agreeing to pay a staggering $6.6 billion for the operations. The purchase came about two years after Campeau paid $3.4 billion for Allied Stores.

Although the department stores themselves are in solid operating shape, they are staggering under the weight of the debt that Campeau took on to acquire them.