Spiegel Inc. Announces Reorg Plan

On Feb. 18, Downers Grove, IL-based Spiegel Inc. announced its restructuring plan for its remaining division, apparel and home goods cataloger/retailer Eddie Bauer. Among the changes: The parent company will be renamed Eddie Bauer Holdings and will be headquartered in Redmond, WA, where Eddie Bauer is based.

What’s more, the company will no longer be owned by Germany’s Otto GmbH & Co. Instead it will be turned over to Spiegel’s creditors. As part of the proposed plan, Otto will make a $104 million payment to creditors to release the company and chairman Michael Otto from potential legal claims.

The reorganization plan was filed with the U.S. Bankruptcy Court for the Southern District of New York. Calls to Spiegel went unreturned at press time.

The company expects a hearing to be held on its disclosure statement in U.S. Bankruptcy Court on March 29. Spiegel filed for Chapter 11 bankruptcy protection in March 2003. The company has been trying to sell Eddie Bauer, valued at about $1 billion, for about a year but couldn’t fetch a suitable price. In 2003, Eddie Bauer had sales of roughly $1.3 billion, about three-quarters of which was from its 440 retail stores.

Spiegel’s general unsecured creditors will recover approximately 90% of their allowed claims through a combination of cash and common stock. Spiegel estimates that approximately $1.28 billion of general unsecured creditors’ claims will be satisfied in this manner, including bank debt and trade payables. Based on current estimates, each recovery will consist of approximately 52% cash and 48% equity. Spiegel’s creditors, with certain exclusions, will initially receive 100% of the equity in Eddie Bauer Holdings.

Eddie Bauer Holdings plans to register its class of common stock with the Securities and Exchange Commission and have its shares approved for trading on Nasdaq.

As part of the plan, Eddie Bauer will pursue a new strategic direction for its home products division, focusing on licensing agreements rather than operating its own retail and direct business dedicated to home. As a result, 34 Eddie Bauer Home stores will close, with the majority of the store closings expected to occur in the second half of the year.