How Do You Spell Relief?

In the early-morning chill last Thursday, a line swiftly lengthened outside Bloomingdale's department store in New York City. But these were not shoppers eager to get the first crack at a sale in the chic emporium. They were merchandise suppliers clamoring to collect their money from Bloomie's, the centerpiece of Robert Campeau's troubled empire. After the store offices opened at 8 a.m., some 400 red-eyed vendors marched inside to pick up their checks.

Their determination was understandable. Campeau's American operations are tottering near bankruptcy, and the Bloomingdale's chain is up for sale. The setbacks have devastated Campeau, 66, a brash Canadian developer who became the most powerful retailer in the U.S. when he acquired Allied Stores and Federated Department Stores in 1980s takeover fights. Included in the deals were such prominent chains as Jordan Marsh, Bon Marche, Abraham & Straus and Burdines. But while the raids made Campeau a high-rolling business celebrity, they left his Toronto-based Campeau Corp. with more than $10 billion of leveraged-buyout debt and interest charges so high that the stores could not produce enough income to meet them.

The company is lurching from crisis to crisis. Campeau Corp. managed to scrape together $100 million last week to meet the deadline for paying suppliers who shipped the 257 U.S. stores everything from tank tops to tiaras. This week the firm hopes to persuade Citibank and other major lenders to roll over $2.3 billion of loans. But even if the creditors agree, the Canadian company must put its U.S. retail operations on a sound financial footing by taking drastic steps to trim costs and sell properties. Observes Wilbur Ross, senior managing director of the Wall Street firm Rothschild Inc. and an adviser to Federated bondholders: "The Campeau people have to get all the pieces together at once to solve this problem. The stores can get by in the period after Christmas, but they cannot go without spring merchandise."

To reassure creditors, the corporation's directors last week banished Robert Campeau from all U.S. operations and said he would confine himself to developing Canadian real estate. The twelve board members included Albert Reichmann, chairman of Olympia & York Developments, a Canadian real estate giant that has invested $700 million in Campeau Corp. and holds a 38% stake in the company. Emerging from four days of meetings in Toronto's pink marble Scotia Plaza, the directors said they had vested control of the U.S. stores in a voting trust to be run by a board of U.S. trustees.

The shake-up came as Campeau's troubles threatened to spiral out of control. Anxious suppliers have refused to sell their wares to Campeau units for fear of not being paid. At the same time, Campeau's 100,000 U.S. employees are worried about layoffs, and many top officers have begun to seek new jobs. Says Robert Nesbit, a managing partner at Korn/Ferry, the world's largest executive-search firm: "I shudder at what is happening. Never before have the proud people at Allied and Federated sought us out. Now we are talking to three or four top divisional and corporate people every day."