Spiegel Inc. filed a reorganization plan last week that, if approved, would hand over control of Eddie Bauer to its creditors. The plan was filed with U.S. Bankruptcy Court for the Southern District of New York.
With no assets left other than casual wear Eddie Bauer, it's hardly a surprise that the proposal calls for reorganizing the company around Eddie Bauer by establishing a new parent company, Eddie Bauer Holdings Inc. Eddie Bauer would remain headquartered in Redmond, WA.
“We have made significant progress throughout the restructuring process, reducing our cost structure and positioning Eddie Bauer to be a stronger competitor. As a result, the profitability of the Eddie Bauer business improved substantially in 2003 and 2004,” president/CEO Fabian Mansson said in a statement.
As part of the plan, Eddie Bauer would focus solely on its core apparel and accessories business, which means 34 Eddie Bauer Home stores would close starting later this year.
The company expects a court hearing to be held March 29. Upon approval, Spiegel will solicit votes on the plan.
Key elements of the proposed reorganization include:
· Spiegel's general unsecured creditors, excluding Spiegel Holdings Inc. and its affiliates, will recover 90 percent of their allowed claims through a combination of cash and common stock.
· Spiegel will transfer its interest in Eddie Bauer Inc., Spiegel Acceptance Corp. and Financial Service Acceptance Corp. to Eddie Bauer Holdings Inc. Eddie Bauer Holdings would become the new parent company of the Eddie Bauer business. Eddie Bauer Holdings would operate as an independent business with a separate board of directors.
· Spiegel's creditors, with certain exclusions, initially will receive 100 percent of the equity in the emerging company.
According to a report in The Wall Street Journal, Spiegel's exit from insolvency became possible when controlling shareholder and German billionaire Michael Otto agreed to pay $104 million to release himself from all claims related to Spiegel's downfall.
Along with relinquishing ownership of Spiegel, Otto will forgo repayment of $160 million in loans to Spiegel from his holding company in the months before Spiegel's collapse.
Spiegel filed for bankruptcy in March 2003 with more than $1.7 billion in debts. The company's namesake catalog and its Newport News catalog businesses were sold last summer to Catalog Holdings Corp., New York.