Current News |
Eddie Bauer Files for
Bankruptcy
By STEPHANIE ROSENBLOOM and MICHAEL J.
de la MERCED
Published: June 17, 2009
Source:
http://www.nytimes.com/2009/06/18/business/18bauer.html
Eddie Bauer, the outdoor-clothing chain
that sold goose-down coats to Mount
Everest mountaineers and college
students alike, filed for Chapter 11
bankruptcy protection on Wednesday and
said it planned to sell itself for $202
million to CCMP Capital Advisors, a
private equity firm.
The company filed for Chapter 11
protection in Delaware, and said that
Bank of America, GE Capital and the CIT
Group have agreed to provide up to $100
million in financing during the
bankruptcy case.
Eddie Bauer, which has 371 stores in
North America, is pursuing a sale to
CCMP through what is known as a 363 sale
process in bankruptcy court. A judge
would need to approve the sale, and
other potential bidders could emerge.
CCMP, as a so-called stalking horse
bidder, is entitled to a $5 million
breakup fee if it loses during the
court-supervised auction process.
“We’re not looking to liquidate the
company or close most of the stores,”
said Jonathan Lynch, a CCMP managing
director. “We’re trying to help 8,000
employees save an iconic American
brand.”
The retailer said its stores, catalog
business and Web sites would continue
operating, and that it intended to honor
customer gift cards, returns and loyalty
program points.
Eddie Bauer is the latest apparel chain
to file for bankruptcy protection in
recent months, along with Mervyn’s,
Steve & Barry’s, Goody’s and
Gottschalk’s.
Eddie Bauer was struggling to repay its
debt after consumers stopped spending on
anything but necessities. The falloff in
sales came as Eddie Bauer was trying to
pull off a multiyear turnaround that
included cost cuts, as well as changes
to its management team and its
merchandise.
“Eddie Bauer is a good company with a
great brand and a bad balance sheet,”
Neil Fiske, the company’s chief
executive, said in a statement. “This
process will allow the business to
emerge with far less debt, positioned
for growth as the economy recovers and
as our new products gain traction. We
expect this process to be completed very
quickly, protecting our employees and
critical vendor partners every step of
the way.”
Shares of Eddie Bauer Holdings had been
trading for about 25 cents since last
week.
For the three months ended April 4,
Eddie Bauer’s loss increased to $44.5
million, or $1.44 a share from $19.3
million, or 63 cents, a year earlier.
Sales at full-price and outlet stores
open at least a year declined 13.7
percent, in contrast to a 0.5 percent
increase a year earlier. (Sales were
hurt in part by Canadian exchange
rates.) On top of the sales declines,
the company had $427 million in debt and
was struggling in the tight credit
market.
In a court filing, the company said its
debt load was a result of loans it took
on when its onetime parent company,
Spiegel, filed for bankruptcy in 2003.
Eddie Bauer took on $300 million in
debt, as well as Spiegel’s benefits and
pension plans. The retailer said that
about 50 percent of its earnings now go
toward paying down that debt.
Even after cutting costs as part of its
turnaround, Eddie Bauer made additional
reductions. In January, it cut about 15
percent of its nonretail staff. The
chain said it would also freeze
salaries, limit its capital spending to
about $15 million, rethink some benefits
programs, reduce the size of its board
and the board’s compensation, and lower
Mr. Fiske’s salary by 10 percent for the
rest of the year.
Eddie Bauer’s proposed buyer, CCMP, is a
middle-market private equity firm that
once served as a buyout arm of JPMorgan
Chase. Last year, it hired Greg
Brenneman, who helped fix Burger King
and Continental Airlines, as its
chairman.
CCMP first took a look at Eddie Bauer in
2004, but was dissuaded from making an
investment because the company was then
focused on becoming a women’s casual
apparel chain, along the lines of J.
Jill or Talbots.
“When we looked at it in 2004, we
thought management was taking it in the
wrong direction,” Mr. Lynch of CCMP
said. “Frankly, it had lost its way.”
But a new management team led by Mr.
Fiske began returning the company,
founded in Seattle in 1920, back toward
its outdoor adventure roots. (After
nearly freezing to death during a
hunting trip in the 1930s, the founder,
Eddie Bauer, designed and eventually
patented a quilted goose-down jacket.)
Advisers to Eddie Bauer reached out
again to CCMP about a potential
investment earlier this year. CCMP said
it planned to support Mr. Fiske and his
management team, and was seeking to keep
most of the company’s stores and
employees.
“Roll forward to where we are today,”
Mr. Lynch said, “the business is under
new leadership that’s doing all the
right things.”
Eddie Bauer celebrated a new line called
First Ascent last month by outfitting
two mountaineers as they took on Mount
Everest: Ed Viesturs (who has made a
habit of climbing 8,000-meter peaks
without bottled oxygen) and Peter
Whittaker, the nephew of Jim Whittaker,
who was also wearing Eddie Bauer when he
became the first American to
successfully reach the summit of Mount
Everest in 1963.
“This is a milestone for us,” Mr. Fiske
said in a statement last month. “It puts
us literally back on top of the world.”
|
|
|
|