The Bronfmans Start Bailing

In the tightly knit world of Canadian business, no families have been more dominant than two sets of brothers: Toronto's Bronfmans and Reichmanns. Peter and Edward Bronfman, scions of one of Canada's most powerful dynasties, built their empire over two decades into the largest in corporate Canada. Like Paul, Albert, and Ralph Reichmann, the Bronfmans operated in great secrecy, assembling vast holdings in real estate, natural resources, and finance. During the 1980s, the two family empires grew to touch nearly every sector of Canada's economy. Now, the real estate collapse that brought down the Reichmanns' Olympia & York Developments Ltd. is taking its toll on the Bronfmans, whose empire seems to be crumbling around them.

Comparisons with the fall of the Reichmanns are just "undue speculations," insists J. Trevor Eyton, deputy chairman of Edper Enterprises Ltd. He and the brothers' high-powered team of executives are spending marathon sessions at Edper headquarters in a swank Toronto office tower to make sure such speculation doesn't spread. But the parallels are spooking Canada's financial markets, still reeling from the 1992 collapse of O&Y. Like O&Y, Edper has huge exposure to depressed real estate. O&Y sagged under a $12 billion debt, and until recently, Canadian banks alone had an $8 billion exposure to Edper, counting debt and preferred shares, analysts estimate. Like the Reichmanns, the Bronfmans' empire is so convoluted that outsiders cannot easily understand what's being done or by whom. "And when you can't understand what's going on, you get terrified of what could be happening," says Ross Healy, CEO of Solvency Analysis Corp. of Toronto.