After a few weeks of rumors swirling about its fate, apparel cataloger/retailer Eddie Bauer Holdings today filed for Chapter 11 bankruptcy protection in Delaware.
Eddie Bauer plans to sell most of its assets to private-equity firm CCMP Capital Advisors for $202 million; the sale is open to other bidders per bankruptcy law.
The company also said in its filing it secured “debtor-in- possession” financing from a group led by Bank of America Corp and CIT Group. Bank of New York Mellon Corp., as bond indenture trustee, is its largest unsecured creditor with a $75 million claim.
Eddie Bauer president/CEO Neil Fiske said in a statement that “a crushing debt burden left from the Spiegel bankruptcy combined with the severe, prolonged recession have left us with no choice but to look for ways to restructure the company’s balance sheet.”
Former parent Spiegel had filed for bankruptcy protection in 2003; Eddie Bauer has been an independent company since 2005.
Falling sales haven’t helped matters: The Bellevue, WA-based merchant generated $971.3 million in total sales for fiscal 2008, down from $989.4 million in 2007. The company said May that its first quarter revenue fell 16% to $179.8 million. Its net loss for the first quarter increased $25.2 million to $44.5 million.
Eddie Bauer needs to get back to retail basics, says Stuart Rose, managing director with investment firm Tully & Holland. In other words, he says, “Stock merchandise people want to buy, price it right, control costs and inventory, and don’t saddle yourself with too much debt, because a downturn will come.”
Picking good locations is another retail must, Rose notes. Lee Helman, managing director with investment firm Financo, agrees: Eddie Bauer needed to file for bankruptcy “to get out from under nonperforming store leases to sell it.”