Report shows Federated stands to lose more than $600 million in Fingerhut sale

A financial report released on Aug. 14 by Federated Department Stores shows that the Cincinnati-based retail holding company gained $622 million in cash when it sold the remains of its defunct Fingerhut catalog to former Fingerhut chairman Ted Deikel and his partner Tom Petters and Fingerhut’s receivables to CompuCredit Corp. But it appears that Federated will lose more than $600 million in selling off the properties.

And according to a report in the “St. Paul Pioneer Press,” attributed to Brian Smith, president of Eagan, MN-based equity investment firm Private Capital Management, Federated set aside some $770 million in reserves last year to handle the asset write-off for Fingerhut. As a result, Fingerhut’s book value, Smith said in the report, dropped to $930 million. Factor in Federated’s aggressive write-down on Fingerhut, and Federated could wind up with $149 million in after-tax cash proceeds from the discontinued Fingerhut operations, the paper’s report says. As a result, Smith estimates that Federated, which bought Fingerhut and its Arizona Mail Order and Figi’s subsidiaries in 1999 for $1.7 billion, will lose more than $600 million after the sale.

Earlier this year, Federated announced it would close down Fingerhut and sell off its assets, which it did in June. The company has laid off all but 500 of its 4,700 Fingerhut employees since the beginning of the year. And while Federated continues to operate the other catalog subsidiaries, those remain up for sale as well. Deikel told the “Pioneer Press” on Aug. 14 that he hopes to relaunch a Fingerhut catalog for the holiday season this year.