Many Suppliers Relieved by News of Campeau Filing
Steve Miska took no chances when Campeau Corp.’s retail divisions came through with $650,000 to pay bills last week on December shipments of Generra sportswear.
“In some cases, we actually flew people in to pick up the checks and convert them into cashier’s checks right there,” said Miska, chairman and chief executive of Generra Sportswear Co. in Seattle.
Fears of bouncing checks and unpaid bills led some manufacturers to suspend shipments in November and December to Campeau’s Allied Stores Corp. and Federated Department Stores Inc. subsidiaries, which were reeling under Campeau’s crushing debt load. Allied and Federated operate such stores as Bloomingdale’s in New York, Burdines in Florida and Lazarus in the Midwest.
So it came as a huge relief for apparel makers and other suppliers when Allied and Federated filed for protection under Chapter 11 of the federal bankruptcy code Monday. Bankruptcy protection will allow the stores to reorganize their debt, hold off some creditors and arrange financing to pay bills and buy spring merchandise.
For some suppliers, the bankruptcy filings meant that they could resume business as usual, going ahead with orders for apparel and merchandise to be shipped from now through March. The bankruptcy filing gives high priority to payment of bills for such shipments.
But for other suppliers, the news meant more uncertainty--and they vowed no shipments without cash on the barrel head. They worried about the details of the financing package and the priority for payments, and some suppliers even worried that the filing might compel Campeau banks not to honor checks issued last week to bring Allied and Federated accounts current. On Monday, no suppliers interviewed complained of bounced checks.
Before the filing, Campeau’s predicament threw a chill on the retail business, some suppliers said. “Just going forward, people are going to be more cautious no matter who it is,” said Michael Gould, president of Giorgio Beverly Hills, which ships fragrances to Allied and Federated stores. “We’re not going to ship anything without guarantees.”
Still, he said, “If you shipped anything in the last two months (to Federated or Allied stores), you were rolling the dice. The risk of rolling the dice now is substantially less than what it was.”
With the bankruptcy filing, Federated and Allied won approval from its banks for $700 million in financing to be used for operations, including paying bills and buying goods.
That should go a long way toward repairing supplier relationships, analysts said. Campeau’s financial straits had threatened to choke off Federated and Allied stores’ supply lines at just the time they should be stocking up for the spring.
“Up until virtually this morning, before the bankruptcy filing, none of the suppliers were willing to ship fresh merchandise to the stores, and many of the stores where starting to be spotty in merchandise, particularly the Southern ones, where spring starts earlier,” said retail consultant Kurt Barnard, publisher and president of Retail Marketing Report in New York.
“This whole cloud of uncertainty has now been erased,” said Bernard Chaus, chairman of women’s apparel maker Chaus Inc. in New York.
Chaus stopped shipping in December. The manufacturer received a payment last Wednesday, when Campeau units made good on a reported $100 million in bills. Now, Chaus said that his company would resume shipments this week. “They still owe us money, and I guess that will be in the bankruptcy,” he added.
Not everyone was so trusting. Some suppliers, such as Miska and Jerome A. Chazen, chairman of Liz Claiborne Inc. in New York, said they would wait for more details on the stores’ refinancing before deciding whether to resume business as usual.
Robert Nelson, vice president for sales at New York clothing maker Harve Benard, said Benard would resume shipments that were suspended in November--but on a cash basis only. The New York-based maker does about $15 million of business with Federated and Allied stores.
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