Campeau Files for Bankruptcy, Largest in U.S. Retail History
Canadian developer Robert Campeau’s attempt to build the mightiest store chain in North America on a mountain of junk bonds ended today with the largest bankruptcy filing in the history of U.S. retailing.
Campeau’s holding company, Campeau Corp., unable to pay its huge debts, sought protection from creditors for its Federated Department Stores Inc. and Allied Stores Corp. under Chapter 11 of the U.S. Bankruptcy Code.
Together, they make up the largest department store group in the United States, including Bloomingdale’s, possibly the most prestigious name in retailing, and other familiar names like Abraham & Straus, Burdine’s and Jordan Marsh.
It is the biggest Chapter 11 filing in American retailing history and reflects Campeau’s inability to pay off $8 billion in debt, much of it acquired when the Canadian parent acquired the two U.S. subsidiaries in the mid-1980s.
Campeau also owns Ralphs, a Southern California supermarket chain spun off from Federated. Ralphs was unaffected by the filings.
The filing followed weeks of speculation in the retail trade over how Campeau would deal with the problems of operating its chains while continuing to pay their suppliers.
“The decision to seek Chapter 11 relief was based on a conclusion that action was required at this time in order to preserve the operation’s strength and assets of the two department store companies while the corporate debt is restructured,” Campeau said in a news release.
The filing was made in the U.S. Bankruptcy Court for the Southern District of Ohio in Cincinnati. Federated and Allied are based in Cincinnati.
Campeau spokeswoman Carol Sanger said U.S. Bankruptcy Judge J. Vincent Aug had not issued any orders about appointment of trustees or set court hearings.
Under a Chapter 11 filing, the companies get a reprieve from creditor bills and can continue operations while reorganizing their finances. But all decisions regarding the companies must be approved by a bankruptcy judge.
Toronto-based Campeau, which also owns commercial real estate and shopping malls in the United States, stated that all of its U.S. stores will remain open and the company expected all customer services, such as credit card purchases and merchandise returns, to continue normally.
One of the chains, Lazarus, ran full-page ads in Cincinnati and Columbus newspapers today saying it was conducting “Business As Usual.”
In addition to the Chapter 11 filing, the companies announced today they had negotiated further bank financing to cover their current cash needs.
Federated said it had an agreement in principle with a bank syndicate led by Citibank for $400 million in financing, while Allied had a similar agreement from Chemical Bank for $300 million. Both are subject to agreement by the syndicates and approval by the bankruptcy court.
A number of analysts have said a Chapter 11 filing could benefit Federated and Allied by reassuring suppliers they will be paid if they continue shipping merchandise to the troubled stores.
Suppliers who ship merchandise to the stores after the Chapter 11 filing would take precedence over many other creditors in getting paid.
On Sunday, Campeau had announced it won a five-day reprieve from a group of banks for a deadline today for deciding whether the company was in default on a $2.34-billion loan arrangement.
Allied owns the Jordan Marsh, Bon Marche, Maas Brothers and Stern’s department stores. Federated runs the Bloomingdale’s, Burdine’s, Lazarus, Abraham & Straus and Rich’s chains.
