Spiegel Says It Will Lay Off More Than 600

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Spiegel released some good news yesterday involving its planned reorganization from bankruptcy, but also announced more than 600 layoffs due to the closure of a sales and service center, restructuring of its headquarters work force and other staff realignments.


The teleservices division, which handles sales and service calls for The Spiegel Group merchant companies, will close a facility in Bothell, WA, on July 6, eliminating 365 associates. The company said the closure will allow it "to better leverage the capacity in its other call centers," in Rapid City, SD; Hampton, VA; and Canadian sites in Saint John, NB; and Sydney, NS.


The Eddie Bauer division will eliminate 180 associates in its Redmond, WA, headquarters effective May 9.


Spiegel also scaled back systems development initiatives, leading to about 90 layoffs in the corporate information services organization, which provides systems support to all the Group's operations. Most of the associates affected were at the company's Downers Grove, IL, headquarters and its Chicago-area data center.


Spokeswoman Debbie Koopman said the company has not yet published any financial data involving how much Spiegel will save through the layoffs. She did not rule out future layoffs.


"The reorganization is an ongoing process, so we will continue to look at where we are with The Spiegel Group and make the appropriate decisions going forward," she said.


As part of Spiegel's efforts to move forward, the company said yesterday that the bankruptcy court approved two key parts of its reorganization plan.


First, Alliance Data Systems Corp. and Spiegel said that the court OK'd their private-label credit card agreement May 2. The programs will be for Spiegel's merchant divisions -- Eddie Bauer, Spiegel Catalog and Newport News -- and will be administered by World Financial Network National Bank, an Alliance subsidiary.


Spiegel Inc. and the three merchant divisions entered into separate but essentially identical 10-year agreements with Alliance. The new credit card programs will be separate from and have no relation to Spiegel's previous credit card program, which Spiegel canceled last month.


That program, which had been managed by Spiegel subsidiary First Consumers National Bank, encountered problems after Spiegel tried to market the cards to the sub-prime market, which includes consumers with poor credit histories who pay high interest rates.


Alliance will provide account acquisition and activation, issuance of new cards, receivables funding, card authorization and customer care as well as billing and remittance services.


And in other news, The Spiegel Group obtained final bankruptcy court approval yesterday for the full amount of its $400 million senior secured debtor-in-possession financing facility. A group of banks, led by Bank of America, N.A., Fleet Retail Finance Inc. and The CIT Group/Business Credit Inc., will provide the financing facility. Banc of America Securities LLC arranged the financing.


The facility will supplement the company's cash flow from operations to fund its operations, including the purchase of goods and services, during the restructuring.


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