BUSINESS

A fallen tycoon

Robert Campeau edges closer to bankruptcy

JOHN DALY May 13 1991
BUSINESS

A fallen tycoon

Robert Campeau edges closer to bankruptcy

JOHN DALY May 13 1991

A fallen tycoon

BUSINESS

Robert Campeau edges closer to bankruptcy

At the height of his dazzling success in the mid-1980s, Robert Campeau enjoyed rubbing shoulders with the rich and famous of Canadian—and international— society. At a lavish party at his sprawling Toronto mansion in 1984, the guest list included such celebrities as former prime minister Pierre Trudeau and entertainer Paul Anka. Last week, however, when the fallen 66-yearold tycoon arrived back in Toronto after spending the winter in seclusion in Austria and Florida, virtually the only people awaiting his return were unpaid lenders who want to force him into personal bankruptcy. Chief among them was the Bank of Montreal, which is trying to recover almost $30 million in personal loans and interest. And late last week, bank officials told Maclean ’s that they were trying to locate Campeau in order to serve him with a bankruptcy petition, giving him just eight days to prove that he is solvent.

Campeau himself could do little more than watch last week as lawyers in Canada and the United States pored over proposals to carve up the U.S. department store empire he acquired in two record-breaking retail takeovers in 1986 and 1988. In total, the headstrong developer paid $13.1 billion for New York Citybased Allied Stores Corp. and Cincinnati-based Federated Department Stores Inc., which owns Bloomingdale’s and several other retail chains. But Campeau clearly bought more than he could afford. In January, 1990, the two companies applied for bankruptcy protection in

one of the most spectacular business failures in U.S. history. For Campeau, that was only the beginning of a series of setbacks. In August, the board of directors of Toronto-based Campeau Corp., the parent company of Federated and Allied, dismissed Campeau as chairman and chief executive.

Campeau himself no longer owns shares in the company that he founded in 1949. He surrendered his holdings after failing to repay personal loans from the National Bank of Canada, the Bank of Nova Scotia and other lenders.

Under a plan made public last week by the U.S. managers of Federated and Allied, the two companies have offered to settle all $9.4 billion in claims from the more than 50,000 lenders, bondholders and merchandise suppliers who are owed money. Most of the creditors would receive cash as well as stock in a new Cincinnati-based holding company, to be known as Federated Department Stores Inc. Campeau Corp. would be left with a 15-per-cent stake in Ralphs Grocery Co., a California supermarket chain, as its only U.S. holding.

Many small suppliers welcomed the proposal, describing it as the best they could have

hoped for under the circumstances. “I hear we’ll probably get about 60 cents on the dollar,” said Bud Konheim, president of New York-based clothing manufacturer Nicole Miller Ltd., which is owed about $230,000 by Federated. “The rest would be in stock, which I’ll turn around and get rid of the next day.” Even if all of the creditors accept the plan, analysts say that the wounds that Campeau inflicted on the U.S. stores may take years to heal, Almost 10,000 Allied and Federated employees— nearly one in 10—lost their jobs over the past five years of the chains desperately tried to slash costs.

In Canada, Campeau Corp. put its entire $1billion real estate portfolio on the auction block last spring. So far, the company has sold more than $500 million worth of Canadian real estate, including the Complex Guy Favreau office block in Montreal and the Térrasses de la Chaudière office complex in Hull, Que. Its holdings now include a half-interest in Toronto’s Scotia Plaza office tower, five other office buildings in Ontario and several small shopping centres and business parks in the province. The company’s chairman, Stanley Hartt, a former chief of staff to Prime Minister Brian Mulroney who took over the top job in November, is expected to unveil soon a proposal to settle claims by the company’s remaining Canadian creditors.

Campeau, who rose from an impoverished childhood in Sudbury, Ont., to become one of Canada’s most aggressive and powerful businessmen, is still a director of the company that bears his name. But he has not attended any of its monthly board meetings since December. And if he is pushed into bankruptcy, he will be forced to resign his directorship. According to several people close to the fallen developer, Campeau and his second wife, Use, were planning to spend only a few days in Toronto last week before flying to Austria, where they have spent an estimated $10 million to construct an opulent château nestled in the Alps. For anyone else, the threestorey mansion with a rooftop pool would be an idyllic retreat. But, for Campeau, the lakeside residence represents only a tiny fraction of the wealth that was once within his grasp.

JOHN DALY