The following quote appeared in The Wall Street Journal (December 26, 1989). It refers to the problems of Campeau Corporation, a Canadian-based retail empire that declared bankruptcy in early 1990. At the time, Campeau’s department store chains included Bloomingdales, Rich’s, Burdines, Abraham & Strauss, and Lazarus. Campeau Corp.’s announcement Friday that its bankers believe it has technically defaulted on $2.34 billion in debt probably willfreeze new spring shipments, apparel makers say. Citibank, leader ofthe bank syndicate providing much ofCampeau’s debtfinancing, informed Campeau by letter last week that Campeau had violated certain covenants on debt . . . and unless Campeau can remedy the default by December 31, Citibank stated it may demandfull repay¬ ment ofthe loans. REQUIRED:

a. What is a “technical default,” and how is Citibank reacting to it?

b. Explain why apparel makers may “freeze new shipments” and why this could present great problems for the Campeau organization.