Overleveraged, Overconfident

Betting on Wallstreet: Robert Campeau and the destruction of retail

• Cherise Lloyd • Season 2 • Episode 3

Share episode

Robert Campeau: the man who bought Bloomingdale’s—and broke American retail doing it
From a post-war Ottawa homebuilder to a swaggering 1980s dealmaker, Robert Campeau rode junk-bond rocket fuel to snag Allied Stores (1986) and then Federated Department Stores—owner of Bloomingdale’s (1988). The plan: use iconic retailers to anchor hulking real-estate plays. The problem: interest bills that cash flow couldn’t cover. When the tide went out, the debt mountain snapped—and in January 1990, Allied and Federated plunged into Chapter 11 in what was then the largest retail bankruptcy in U.S. history. It was a masterclass in speed, leverage, and hubris.

What we cover in this episode

  • How a self-taught developer who built Ottawa’s skyline (Place de Ville) convinced Wall Street to fund billion-dollar bids.

  • The Allied ($3.6B) and Federated/Bloomingdale’s ($6.6B) takeovers—and why “own the stores, own the malls” was irresistible in ’86–’88.

  • The cash-flow math that killed the deal: rising rates, softening sales, and ~$8B of IOUs coming due.

  • Fallout: courtrooms, creditors, and the eventual rebuilding of a slimmer Federated that would later become today’s Macy’s, Inc. (after bankruptcy reorg).

Why it matters
Campeau is the cautionary tale for every “move fast, buy big” fantasy: speed can win auctions, but debt keeps score. If your thesis relies on tomorrow’s growth to pay yesterday’s interest, you’re not running a company—you’re racing a clock.

Want to know more: Going for Broke: How Robert Campeau Bankrupted the Retail Industry, Jolted the Junk Bond Market, and Brought the Booming 80s to a Crashing Halt by John Rothchild

This episode was researched and written by Cherise Lloyd. Some music was created by using UDO. You can find show notes, transcripts, and sources at www.overleveragedoverconfident.com. Follow us on Instagram at Overleveraged Overconfident. Support the show on Patreon and help us keep deep-diving into those spectacular financial fails.. Overleveraged Overconfident is part of Seven Seven Spider, which specializes in deep dive research and financial storytelling. All research uses publicly available sources, so no confidential or regulatory information, just my keen sense of spotting nonsense.

Joshua:

Hey Libby, do you know anything about leverage buy outs of the 1980s?

Libby:

No, mmm not really Paul.

Joshua:

Well then I have a story for you. It’s about one of the most uh spectacular financial flame outs of the late 1980s. The rise and well the absolutely catastrophic fall of Robert Campo,.

Libby:

the Canadian real estate guy?

Joshua:

Yeah, the Robert Campo story. Hey wait, how do you know about him?

Libby:

I used to live in Toronto.

Joshua:

Oh really, huh. Ok anyway.

Libby:

Yeah- he made an impression. Lot’s of stories.

Joshua:

Exactly. He was a memorable person. And who for a brief kind of insane moment owned huge chunks of American retail. Bloomingdales even. This is About Robert Campo’s dramatic really short-lived debt fueled retailing empire.

Libby:

I heard he was a little loony

Joshua:

Okay. you could say that. Robert Campo, the man himself, definitely an outsider. Eighth grade dropout, son of a mechanic. Started out life in Northern Ontario

Libby:

So, not exactly your typical boardroom titan, was he?

Joshua:

Not at all. He came from, well, absolute bedrock poverty. One of 14 kids.

Libby:

14? Wow.

Joshua:

Yeah. His dad was an auto mechanic up in Sudbury, Ontario, which, you know, is this Pretty bleak mining town, so bad that Apparently, US astronauts even practice moonlandings there because it looks so desolate.

Libby:

Get out.

Joshua:

And he quits school in 8th grade and then ends up running Bloomingdales. I mean, the ambition there is just staggering. It really says a lot about his drive and his resourcefulness. Even as a kid, there's this great story about him working in a maintenance shop.

Libby:

Ohhh, Yeahhh really

Joshua:

A truck breaks down, stops this critical smelting operation. He doesn't wait for parts. He goes in overnight, hand grinds a damaged crankshaft himself to get it running again.

Libby:

Wow. Is that true?

Joshua:

Who cares, the story points to a mix of like mechanical skill and just pure force of will. That was him. He believed if the standard tools didn't work, he'd just invent a new one.

Libby:

the man himself who was pretty unorthodox.

Joshua:

Definitely unorthodox. And the financial engineering on Wall Street that, well, let's be honest, enabled his ambition and then the fallout, the brutal economic domino effect Which led to that massive chapter 11 filing in 1990.

Libby:

So help me, how did he go from crankshaft maker, to being someone who could get a few billion?

Joshua:

So he and his wife drifted into Ottawa, with really no plan. That changed when he saw his cousin build and then sell a house for double the investment. So bam- he build a house for him and the fam- and then sells it.

Libby:

The OG flipper.

Joshua:

Yeah but this is the 1950’s and old farms were being bought up and sold in parts- called subdividing the land- At one point he was responsible for more than 20% of the housing in Ottawa.

Libby:

Okay I’m seeing the drive and resourcefulness.

Joshua:

And then he branched out Into apartments and office towers- and then landing on a deal with the Canadian government.

Libby:

Yeah. So he built this huge real estate empire up in Canada first, Ottawa mostly. I think he controlled something like uh 40% of the government's least office space. A huge footprint.

Joshua:

But he was just singular, very volatile, super energetic, almost manic, you could say. And you have to remember, he'd apparently survived two mental breakdowns.

Libby:

Yeah, that's a key detail.

Joshua:

And his whole health thing is pretty extreme, swimming daily in a specially purified pool. And the sheep brain injections.

Libby:

Sheep brain injections. You can't make this stuff up.

Joshua:

It kind of explains the mad bomber nickname from the bankers at Citicorp, doesn't it? They saw this unpredictable guy making huge plays.

Libby:

But his personality sounds like a real wild card. Demanding, charismatic, but also mercurial. Prone to these exotic tangents.

Joshua:

Oh, completely. We're talking ideas like a water powered dishwasher or these low cost cardboard box houses for the developing world. Big sweeping ideas, whether it was for washing machines or uh corporate finance.

Libby:

Okay. So, how does that connect? Cardboard houses and buying department stores.

Joshua:

Well, his guiding financial idea supposedly came from Monopoly, the board game.

Libby:

Monopoly. Seriously?

Joshua:

Yeah. He apparently saw it as a real estate strategy guide. You know, borrow from the bank, put hotels on every property, leverage up.

Libby:

So with that reputation, that volatility, why did Wall Street bet the farm on him with billions of dollars? I mean he doesn't seem to be a great credit risk.

Joshua:

Well, I think it boils down to his motivation. It wasn't just money. It was this um almost desperate need for social legitimacy.

Libby:

Ah, okay. I heard he felt slighted, you know, discriminated against by the English-speaking establishment in Canada, especially after that hostile bid for Royal Trusco got shot down in 1980.

Joshua:

Absolutely. Like that failed hostile bid for Royal Trustco the premier financial institution in Canada back in 1980. Campo was convinced that there were exciting synergies if his real estate company and the firm were merged with him as the CEO of course. But mostly he wanted to expand into new thing, just use the capital of Royal Trustco to fund his bigger dreams.

Libby:

Kinda of out of his league- it was obviously worth more than a real estate company.

Joshua:

yeah by like a billion- but the optimistic Campeau took a plane, a train and a car, and arrived at CEO Kenneth White’s distant farm to discuss the exciting synergies-White to reportedly grip Campeau by the arm and had him thrown off the property.

Libby:

The CEO literally threw him off the lawn.

Joshua:

Physically threw him off. So he tried to make a hostile takeover- and the old guard shut him out

Libby:

Ouch:

Joshua:

So the story goes, the ultimate rejection, right?

Libby:

Did he vow revenge?

Joshua:

Well shortly- but delayed since after that, he apparently had these periodic emotional crises. His brother, who was a priest, advised him to do therapeutic carpentry, building a garage or a house to cope. So it was delayed a bit.

Libby:

Yeah. A powerhouse, like you said, but maybe a brittle one, he sounds tiring Also it sounds like a pretty high-risk proposition for any investment bank.

Joshua:

Thinking of backing him,you'd think so. But he had started building in California, Florida and Texas by now, with uneven results at best. But he felt that he may get a clean shake away from Canada. In his words, he was tired of beating his head against the wall in Canada.

Libby:

So he headed south, With his eyes firmly on Wallstreet

Joshua:

Not yet. He tried to buy a savings and loan, but that’s difficult for non- U.S. citizens- and the people he met in that sent him to Thomas Randall of Tribco Partners in New York. It seems Randall had a friend at the retail company, Allied. Which Randall thought would be a fit for Campo.

Libby:

Ok- who advises someone to takeover an entire company when the person has zero experience in that industry?

Joshua:

To Randall’s credit he only pitched a few shopping centers Allied was selling. At the most Randall suggested he buy Brooks Brothers, which would be an easy fit into Campo’s existing mall holdings. But Campo was not like any other client, and didn't see anything as impossible.

Libby:

Buckle up, Randall.

Joshua:

Campo became fascinated with Macy's Department stores which was in the process of its own leveraged buyout(LBO) led by its chairman, Edward Finkelstein and demanded to meet with him. Finkelstein it seems had better things to do than chat,

Libby:

hmmm,

Joshua:

So now Campo had a new enemy and he vowed to"become Mr. Finkelstein's equal" so he told Randall to look into Allied because if Finkelstein could do a leverage buyout then why can't he.

Libby:

Okay. Aggressive. Check. But you said he knew zilch about investment banking. So what exactly is a Leverage Buyout?

Joshua:

A Leveraged Buyout also refered to as a LBO, is a business transaction where a buyer, here it's Campo, uses a small amount of its own money and a very large loan, which is called leverage to purchase another company. The goal is to use the acquired company's profits to pay off the debt, improve the business, and then sell it for a huge profit a few years later.

Libby:

How did he get Wall Street's top dogs on board for this stuff? Again he had no experience in LBOs or in retail.

Joshua:

Because in a way, he was the dream client for the LBO. This was The era of leverage buyouts. His advisers, guys like Alan Finkelson, were apparently uh charmed by Campo's quirky bravado.

Libby:

He was willing to pay, I bet.

Joshua:

Oh, yeah. and Bruce Wasserstein the big M&A guy at First Boston. He gave Campo this whole dare to be great speech, basically saying greatness meant taking on quote huge debts and pay huge fees.

Libby:

Wow, that's quite the pep talk.

Joshua:

It really set the stage

Libby:

Ok so we have Campo first starting to look at banks, then shopping malls then move to taking over a large retail company with no experience, how did he pull that off. I mean I would think any prudent board of directors would tell him to go away?

Joshua:

They did, they rejected his offer and wanted to do anything to keep him out.

Libby:

But he bought it anyway, how did he manage that?

Joshua:

This is where you really see the 80s playbook, that hostile street sweep tactic.

Libby:

Can you just quickly explain that for, you know, anyone not familiar?

Joshua:

Sure. Basically, you just go into the open market and buy up a massive chunk of the target company's stock really fast, often overnight. But before they can even react or put up defenses, you've got control. Super aggressive.

Libby:

Since the company was already a take over target The share price must have shot through the roof- the street was looking for a big payout. Those stocks couldn’t be cheap.

Joshua:

Campo bought 25.7 million shares from arbitrageurs, or those wall street speculators, which came to$1.8 billion. First Boston put up$900 million and Citigroup made up the remainder.

Libby:

Billion with a B. And nothing out of pocket for Campo really. And it was the last successful street sweep before the SEC closed that loophole.

Joshua:

That's right. It worked, but it clearly raised flags about the system Wall Street was running. Hey, wait I thought you said you didn't know about leverage buyouts?

Libby:

I said, not really, I wouldn’t be on a financial scandal podcast if I didn’t know something, hmm.

Joshua:

Hmmm, right. Anyway, they were exploiting loopholes so big they had to be shut down immediately.

Libby:

Allied must have been shocked.

Joshua:

The CEO referred to it as"blind-sided by a trainload of clowns" Campo Picked it up for about$3.7 billion. That got him Brooks Brothers and Ann Taylor.

Libby:

Since Campo was a real estate guy and not a retailer, I am assuming the immediate result for Allied workers was not good.

Joshua:

Yeah- you are right about that. Thousands of job losses very quickly as Campo started trimming ranks to to service the initial debt. But he wasn't satisfied. He wanted more.

Libby:

What, more people fired?

Joshua:

Nope. He set his sights on federated department stores. This was the big one. The Everest of retail deals.

Libby:

This is getting expensive i am sure.

Joshua:

In 1988, after this marathon bidding war between him and RH Macy, he finally got it. The price tag was$6.6 billion, but the total cost was probably closer to 8.8 billion

Libby:

8.8 billion. That’s just huge.

Joshua:

Exactly.This is the guy who in just a few years used leverage buyouts, you know, to pile up over 10 billion dollars in debt. At the time, it was the largest successful hostile takeover outside the oil industry

Libby:

10 billion? Wow. What did Federated bring?

Joshua:

Iconic names. Bloomingdales, which he dreamed of expanding massively, maybe 30 stores. And some big regional players Rich’s in Atlanta, Burdines, in Miami and the south, Lazarus in Ohio, real anchors of American retail. But to pay for that massive price tag, he had to start selling things off almost immediately.

Libby:

Right. Right. You can’t fire everyone, right?

Joshua:

Absolutely. The debt was just crushing. Immediate asset sales were part of the plan. He sold off divisions like Filene’s and Bullock's right away.

Libby:

And Macy's, the rival he beat,did they actually buy some of these stores?

Joshua:

Yeah. As part of the truce. Macy's ended up buying Bullocks and I magnin silver to pay the entry fee.

Libby:

Which brings us to the people who made this possible. Wall Street. My guess They weren't just watching. They were driving this.

Joshua:

Driving it and profiting massively. The fees were astronomical. At least$60 million just from the federated deal. And the key figure here was Bruce Wasserstein at First Boston. The Clausewitz of deals That was his nickname. His philosophy was pretty stark. Focus laser-like on what was legally possible.

Libby:

That kind of money makes bankers work around the clock, miss holidays, everything.

Joshua:

Precisely. First Boston, Waserstein's firm, walked away with$200 million in fees just from the federated deal. Let's put that in perspective.$200 million. That was more money than federated. The entire company had actually earned in profit the whole previous year.

Libby:

Yeah, it's kind of a messed up incentive structure, right? It's totally perverse.

Joshua:

Don't let fuzzy ethical questions get in the way of structuring the biggest possible deal.

Libby:

Legally possible sounds like a way to ignore whether it's actually prudent or, you know, sensible. Did the sources give any sense of the pressure inside those banks?

Joshua:

It was all about the fees really. And Wasserstein's big, bright innovation, the hostile bridge loan.

Libby:

Okay. What's that?

Joshua:

Think of it as a huge short-term loan from the investment bank itself. First, Boston committed enormous amounts of its own capital, like$1.8 billion, just for the Allied deal as temporary financing to close the deal instantly.

Libby:

So, the bank puts its own money on the line for a short time.

Joshua:

Yeah. It's like a financial adrenaline shot. They provide the cash upfront, super confident they can refinance it later by selling off assets or issuing junk bonds.

Libby:

Ah, junk bonds. That confidence, that assumption they could always refinance. That's where it starts to unravel, isn't it?

Joshua:

Precisely. The compromised company is now saddled with over 10 billion in debt. The whole house of cards depended on the junk bond market staying strong enough to absorb all this new debt and the market choked.

Libby:

I had an uncle who did that on a sandwich once. Hates bread to this day.

Joshua:

Well When they tried to sell the federated junk bonds to repay those bridge loans, investors bucked. They had to pull the initial offering.

Libby:

Oh boy. That Sounds bad.

Joshua:

When they finally reissued it, the interest rates were drastically higher. We're talking 16%, sometimes 17.5% interest.

Libby:

17% of billions. How could any business possibly sustain that?

Joshua:

No surprise no company can, especially one with margins like retail. That interest payment alone was this crushing weight that made the actual retail operations almost impossible to run profitably. It basically guaranteed failure.

Libby:

So, the debt is now actively killing the retailer.

Joshua:

Analysts apparently thought the price paid for Federated was way over the drop dead price.

Libby:

What does that mean? Explain that.

Joshua:

The drop dead price is basically the absolute maximum price the underlying business, the actual stores generating cash could possibly support without going bankrupt.

Libby:

Okay. Analysts calculated Campo paid so much more than that he left himself zero margin for error. The business needed perfect management, a perfect economy just to cover the interest payments. And instead of perfection, they got

Joshua:

management chaos. Compounding the lack of financial margin was Campo's own erratic style. He'd apparently act on the last strong opinion he heard.

Libby:

Not exactly stable leadership.

Joshua:

Not at all. He brought in Robert Moroski, a respected operations guy, but then quickly pushed him out because the existing merchant executives didn't like his background.

Libby:

You just can't run a giant retailer with that kind of revolving door at the top.

Joshua:

And this instability, it led directly to that huge operational mistake in late 88, early'89.

Libby:

Let me guess, don't help me here hmmm a non-retailer owner new to this- its gotta be an inventory mess.

Joshua:

Exactly. It was The inventory debacle. We need to picture this. Under the new CEO, John Burton, they somehow overfocused on basic goods. Towels, socks, sheets.

Libby:

Basics. Okay. But too much?

Joshua:

Way too much. The new leaner federated, which had only about 43% of the old company's sales volume was somehow stocking 65% of the old company's merchandise volume.

Libby:

Wait, smaller company, way more stuff. How does that even happen?

Joshua:

Like you said non- merchants doing retail. Bad planning, poor systems, probably chaos. The stores were literally drowning in merchandise they couldn't sell fast enough. In one quarter in 89, inventory shot up 26% while sales only grew five percent

Libby:

O, so that a lot of cash is tied up in warehouses full of socks and sheets. You can’t pay interest payments with a dish rag.

Joshua:

Exactly. Wrong items, wrong prices, or just too much volume tying up precious cash. And then Campo himself made it worse.

Libby:

worse? Gosh this guy, can't leave well enough alone.

Joshua:

It was pretty fatal. definitely a critical error. He pulled$125 million out of the company's working capital fund.

Libby:

The money they used to buy new merchandise, you know to sell.

Joshua:

Yeah he used it to prepay a small bank loan, probably to look good to the banks or just because someone asked him to probably someone who wanted out of this situation quick. But taking that cash created a severe liquidity crunch by spring 89. They literally couldn't afford to buy the right seasonal goods because the working capital was gone.

Libby:

So they go into the holiday with nothing seasonal- hope everyone wanted socks for Christmas. Gish, This is just spiraling down.

Joshua:

And the retail deflation that followed was just pure desperation. By the 89 holiday season, Campo stores were slashing prices 40% off, huge cuts just to generate any cash flow.

Libby:

And in retail you have to price match so that dragged everyone else down, too.

Joshua:

It forced Macy's, Neiman Marcus, all the big players to cut prices, too. It triggered this widespread retail price deflation across the whole industry.

Libby:

A race to the bottom started by Campo's desperation.

Joshua:

And the final act, suppliers must have been getting nervous, terrified. Especially smaller manufacturers. They just stopped shipping goods, worried they wouldn't get paid. Smart move. Turns out.

Libby:

Yeah?

Joshua:

When Federated and Allied finally filed for Chapter 11 bankruptcy on January 15th, 1990, the last batch of checks they'd send out to vendors just before filing, they bounced.

Libby:

Oh no, that's brutal. Bankrupt and the last checks are worthless.

Joshua:

Left a lot of small suppliers holding the bag with losses in inventory they couldn't sell. The whole system just seized up. A spectacular implosion.

Libby:

The empire built on debt just crumbled. So what happened to Campo?

Joshua:

For Robert Campo, it was total ruin. Creditors kicked him out of US operations, stripped him of his corporate titles. His net worth went below zero, less than zero. Forced into involuntary personal bankruptcy. He lost absolutely everything, right down to his prized corporate jet.

Libby:

The Wall Street guys? the lawyers? the bankers?

Joshua:

well, that's the other side of the coin. They were largely shielded. In fact, they got a second payday from the bankruptcy itself.

Libby:

How does that work?

Joshua:

The bankruptcy court approved tens of millions in fees for the professional helpers, law firms, consultants, often the same firms that helped put the overpriced deals together in the first place. The fee machine just kept running.

Libby:

Unbelievable. The people who engineered the failure profit from cleaning it up. What about the stores?

Joshua:

The companies Federated and Allied eventually emerged from bankruptcy. But thousands of jobs were lost in the process. And ironically, Alan Questrom,

Libby:

who was he?

Joshua:

A former executive who had actually left with a golden parachute before the collapse. He was lured back to run the reorganized company.

Libby:

Lured back with what?

Joshua:

A very nice contract. Something like$12 million plus a$2 million signing bonus. He ended up making far more running the bankrupt company than he ever did before.

Libby:

The incentive structure is completely upside down here.

Joshua:

It's a powerful story about perverse incentives, isn't it? And our research noted predictably, everyone blamed everyone else afterwards. Campo blamed Wall Street for pushing a bad deal.

Libby:

And the bankers blamed Campo's erratic behavior.

Joshua:

Exactly. But maybe the real story, the deeper lesson is about what one source called the hopeless romance between the two.

Libby:

Hopeless romance?

Joshua:

Yeah. Kampo's massive ego and ambition perfectly matched the banker's insatiable hunger for fees. They needed each other right up until the moment the actual business couldn't carry the weight of their combined desires.

Libby:

Which leads to that final provocative thought for you, the listener. If the main goal in these huge leverage deals becomes just maximizing shareholder value, or maybe more accurately, maximizing professional fees regardless of whether the actual company, the stores can survive it.

Joshua:

Does the survival of the operating business even matter in that equation? Think about that cycle. Thank you for joining us at a Quick Take on Overleveraged Overconfident A short reading of yesterdays and today's con men and scams.

Libby:

If you want more read the book Going for Broke How Robert Campeau Bankrupted the Retail Industry, Jolted the Junk Bond Market, and Brought the Booming Eighties to a Crashing Halt by JOhn Rothchild.

Joshua:

You can listen to more Overleveraged Overconfident at Amazon, Apple and Spotify podcasts.

Libby:

You can also read our companion newsletter The Unspoken Deal, on substack. Where we give the rules of Confidence, Power and Persuasion culled from watching some of the biggest financial blowups. Learn how you can get ahead without the jail time or disgrace. Stay Wary.