Chapter 11 for Signature Styles

Spiegel is back in bankruptcy. Signature Styles, a division of private equity firm Patriarch Partners formed two years ago to purchase Spiegel Brands, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware late Monday.

The Spiegel, Newport News and Shape Fx apparel titles were included in the filing, along with affiliate Signature Styles Gift Cards. Signature Styles is seeking court approval for the sale of its assets by early August.

Signature Styles recorded a net loss of $31.1 million in 2010 on sales of $119.9 million, according to court documents. The company listed assets of $48.6 million and liabilities as $87.6 million, according to Reuters.

Spiegel Brands was acquired by Signature Styles for $21.7 million in June 2009. Its previous owner, Granite Creek Partners, had purchased the multititle mailer in September 2008 from Catalog Holdings, a portfolio company of Golden Gate Capital that had owned Spiegel since 2004. Spiegel had filed Chapter 11 bankruptcy in 2003.

Craig Battle, managing director at investment bank Tucker Alexander, wasn’t surprised by the news. “These [catalogs] have been here before, and have never been successfully resurrected,” he says. “It usually comes down to merchandise issues.”

Spiegel Brands has been struggling for years, says Chris Kampe, managing director at investment bank Tully & Holland.

“Golden Gate Capital, notorious for acquiring underperforming catalog businesses, bought the business out of bankruptcy in 2004,” Kampe notes. And in July 2008, “just before the market downturn, Granite Creek Capital acquired the business from Golden Gate. After the recession took hold, the company fell into deep distress and experienced a substantial decrease in sales.”

Patriarch acquired the business thinking the Spiegel and Newport News brands were strong, and that over time, the core customer would return to shopping these brands at more normal spending levels, Kampe explains.

“Tactically, there was also an effort to move more toward an Internet retail model and away from the catalog model,” he adds. “It is evident that the plan was less than successful.”

On the up side, Kampe says the bankruptcy filing will rid the business of its liabilities, and allow a new buyer to have a fresh attempt at making the company profitable.