Campeau May Sell Stock in Its Retail Units : Securities: New issues in Allied Stores and Federated would be part of its plan to come out of bankruptcy protection.
Campeau Corp. may sell stock in its department store chains as part of a plan to emerge from bankruptcy, placing well-known stores such as Bloomingdale’s and Burdines back in public hands, officials said Friday.
Campeau’s two retail units, Allied Stores and Federated Stores, which have operated under bankruptcy protection for more than a year, said they may go public early next year.
Analysts said a strong demand for new stock issues and the stores’ improved operating results could make such an offering a credible means to restore fiscal health to the debt-laden retailers.
The recent rebound in the stock market, which has sent several stock indexes to all-time highs, has created fertile ground for new issues, analysts said.
“Given the new-issue market, the secondary issues that are coming to market and the outlook for Federated next year, it doesn’t surprise me that they would consider an equity offering to clean up their balance sheet,” said Prudential Securities retail analyst Wayne Hood.
Allied and Federated have been able to strengthen their business performances as well, analysts said.
Under the leadership of Chairman and Chief Executive Allen Questrom, February sales at stores open at least one year rose 5.9% at Federated and 5% at Allied.
“When you look at them purely on an operating basis, they’re doing well, considering the environment they’re in,” said Hood. “They’ve come a long way from where they were” before Toronto-based Campeau incurred heavy debt buying the two retailers in leveraged buyouts.
Campeau ran up more than $10 billion in debt buying the two companies. It paid $3.6 billion for Allied in 1986 and $6.6 billion for Federated in 1988, taking the publicly traded companies into private hands.
Allied and Federated own some of the nation’s biggest and best-known retailers, including Abraham & Straus, Bloomingdale’s, Jordan Marsh, Rich’s and Burdines, but could not cope with the debt taken on in the buyouts.
The retailers filed for Chapter 11 bankruptcy protection in January, 1990, after defaulting on about $7 billion of debt.
Their operations should “improve significantly” by early next year, the likely timing of the public offering, said Janet Mangano, retail analyst at Jesup, Josephthal & Co.
Sharpened merchandising, reduced inventory levels, fresher inventory and fewer markdowns, strict expense controls and the closing of marginal stores will continue to improve their operating profits, she said.
