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Banks Agree To Extend Grace Period for Campeau Loans

January 15, 1990

NEW YORK (AP) _ A group of banks agreed Sunday to give retailing giant Campeau Corp. a five-day extension before deciding whether it is in default on a $2.34 billion loan, a banking industry source said.

″The company asked for an extension and the banks granted that extension,″ said the source, who spoke on condition of anonymity.

The banks, lead by Citibank, earlier granted a two-week extension for the troubled Canadian company to prove that it was restructuring and would be able to repay the loan. That period was to end Monday.

The source said Campeau requested the additional grace period on Friday and that it was granted by the banks Sunday.

The extension until Friday gives Campeau breathing room to try to come up with a plan to avoid a bankruptcy filing for its retailing operations, Federated Department Stores Inc. and Allied Stores Corp.

Carol Sanger, a spokeswoman for the Campeau units, which are based in Cincinnati, confirmed that talks with Citibank had taken place over the weekend but would not say whether an agreement on extending the grace period was reached.

One analyst said the bank move appeared to be in reaction to a decision by Campeau’s board of directors Thursday to split the U.S. retailing units from the parent company and place them under independent trustees and directors.

″I think Citicorp is simply extending the grace period to see which trustees are chosen and to see which financial course they seek,″ said Janet Mangano, an analyst for Josephthal and Co. Inc., a New York brokerage.

She said the move by the trustees ″forces new leadership to make a fresh decision.″

She added that a declaration by the banks that the loans are in default would most likely compel Campeau to place Allied and Federated in Chapter 11 bankruptcy reorganization, a step the company has said it may be forced to take.

″The Citibank loan call would be the single trigger because Allied and Federated would have such difficulty coming up with $2.3 billion,″ she said.

Another trigger for a bankruptcy filing could be a group of bondholders who say they have not received payments as required under the terms of their bonds, Ms. Mangano said. The bondholders have been in discussions with Campeau over the matter.

Under the restructuring announced Thursday, company founder Robert Campeau lost control of the retailing operations. He will continue to run Campeau Corp.’s real estate and development interests, which are based in Toronto.

Also last week, Campeau made a $100 million payment for merchandise shipped to its 240 stores between Thanksgiving and Christmas. There had been speculation that the company could not make the payment on schedule.

Observers said Campeau apparently wanted to keep good relations with its suppliers so they would ship spring merchandise. A decline in sales at the stores due to a merchandise shortage could make the stores less valuable should they be sold to raise cash or as part of a bankruptcy reorganization.

Campeau already has put its Bloomingdale’s chain up for sale.

Allied owns the Jordan Marsh, The Bon Marche, Maas Brothers and Stern’s department stores. In addition to Bloomingdale’s, Federated runs the Burdine’s, Lazarus, Abraham & Straus and Rich’s chains. Campeau also owns Ralphs, a Southern California supermarket chain spun off from Federated.

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