Cash Shortage Threatens Spiegel Operations
Spiegel said it would be unable to meet financial requirements set by the insurer of its credit-card securities. As a result, the company expects to be forced to divert millions of dollars in cash to its securities holders, leaving little with which to carry out its operations "in the near future and thereafter," Spiegel said in its filings.
Spiegel, which includes Eddie Bauer, Spiegel Catalog and Newport News, said it is developing a plan to restructure its debt to try to continue operations. The company planned to obtain restructuring advisers to assist in this effort.
KPMG LLP, Spiegel's auditor, issued a letter this month raising the possibility that Spiegel's debt problems might leave it unable to maintain its existence. Spiegel's debt problems started two years ago when it began issuing credit to the sub-prime market, which consists of consumers with poor credit histories who pay high interest rates.
Other dismal developments for Spiegel in recent weeks include declining sales, a Securities and Exchange Commission investigation into late filings of its financial reports and the departure of chief financial officer James R. Cannataro to Nintendo's U.S. unit earlier this month.