Directors Group Takes Control of Cash-Starved Retailer Campeau

Toronto tycoon Robert Campeau, bogged down by billions of dollars in debt, was forced Friday to cede control of his U.S. department store empire to a committee of directors.

Meanwhile, Campeau Corp.’s Allied Stores unit said it missed an interest payment on some of its bonds because of the parent company’s failure to nail down the $250-million loan needed to ease a severe cash crunch at Allied and Federated Department Stores.

In a statement issued late Friday, beleaguered Campeau Corp. said a senior executive management group will take charge of the company’s previously announced financial overhaul, which includes the proposed sale of the flashy Bloomingdale’s chain. The management group will report to a committee of directors.

Observers said that step was taken to try to assuage suppliers as Campeau continued its 11th-hour effort to win a vital $250-million cash infusion from Olympia & York Developments Ltd., an important minority shareholder.

“As I understand it, Olympia & York is calling the shots,� said Walter F. Loeb, a retail analyst with Morgan Stanley & Co., a New York brokerage firm. Olympia & York, a Toronto development firm owned by the wealthy Reichmann family, was assumed to have won an increased stake in the company. It previously held about 25%.

Loeb interpreted the announcement about the senior executive management group as an attempt to calm suppliers and assure them “of a more orderly management.�

Robert Campeau “is too quixotic for anybody at this point,� he said.

Although Campeau Corp. said it had agreed in principle on “terms of its loan documentation� for the $250-million loan, the announcement fell far short of the firm commitment that the financial community and suppliers had hoped to see.

The statement added that bankers must now approve key conditions of the loan, including a three-month extension of an $800-million chunk that otherwise would fall due in January. Citibank leads a group of banks that must now decide whether to approve the new terms.

‘Moves Us Along’

Campeau apparently retained the chairman’s title, but Wall Street sources said he has been forced out of power little more than a year after he gambled $6.6 billion to buy Federated Department Stores. A spokeswoman would not say whether he would even be a member of the directors committee.

However, the announcement appeared to do little to placate suppliers.

Many clothing manufacturers reportedly have halted shipments to Campeau’s stores, which include Burdines, Jordan Marsh and Abraham & Straus, because of worries that the company won’t be able to pay its bills.

“We are holding and pulling back as many approvals as possible,� said an employee at the Los Angeles office of Republic Factors, a company that serves as an agent for many clothing makers. “I think that’s pretty much what every factor and unsecured creditor in the trade is doing.�

Campeau spokeswoman Carol Sanger said progress on the loan talks was made Friday as Campeau and his investors and bankers negotiated by conference calls between Toronto and New York.

May Get Approval by Sunday

“This moves us along from where we were the other day,� she said, adding that all issues have been worked out between Campeau and Olympia & York. “The only remaining issues are between Campeau and the bankers.�

As to when the company might get approval from its bankers and announce a firm loan deal, she said there was a likelihood that “a window of possibility would open as early as Sunday night.�

Allied said Friday that it made an interest payment on an unspecified amount of senior notes but failed to make a payment on some subordinated notes. It added, however, that it was not in default because of a 30-day grace period built into the debt agreement.

Friday was the deadline for Allied to make $50 million in interest payments. The company declined to say how much of the payment it had made.

Sanger also declined to reveal the status of a $400-million bridge loan to Federated. That unit was to have stated by midnight Thursday how it planned to refinance the loan, from First Boston Corp. and two other creditors.