Spiegel Says It's Nearing Chapter 11

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A bankruptcy filing may be imminent for The Spiegel Group.

The troubled Spiegel, Downers Grove, IL, said yesterday that it expects to file for Chapter 11 "in the near future" if it cannot obtain alternative sources of financing.

The cash crunch comes as First Consumers National Bank, its special-purpose bank subsidiary, notified holders of its credit-card-backed securities that a payout event to those investors took place because of a "failure to meet certain minimum performance requirements for the reporting period ended Feb. 28."

The performance and credit quality of the securitized receivables have fallen because of higher charge-off rates and lower net sales.

As a result, "substantially all monthly excess cash flow remaining after the payment of debt service and other expenses is diverted to repay principal to investors on an accelerated basis, rather than to pay the cash to Spiegel Inc. or its affiliates upon deposit of new receivables," Spiegel said.

FCNB discontinued user privileges on its MasterCard and Visa bankcard accounts March 7 under orders from the Office of the Comptroller of the Currency.

Also, FCNB no longer is reimbursing Eddie Bauer, Spiegel Catalog and Newport News for charges made with each brand's private-label credit cards. In response, the brands no longer are honoring the private-label FCNB cards and have started issuing private-label credit cards directly, though the new cards are being serviced through FCNB.

Spiegel Inc. is exploring an in-house ability to service these receivables.

Senior retail analyst Walter Loeb of Loeb Associates, New York, mentioned a possible upside to bankruptcy.

"Chapter 11 would [allow them to] continue their relationships with vendors," he said. "They will probably have to focus on their core business. They have several catalogs, and it will be an examination of what the customer really wants. They may cut out some of the ancillary books they've been publishing."


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