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Eddie Bauer Files For Chapter 11 Bankruptcy Protection

Iconic retailer another recession victim

By Mark Huffman
ConsumerAffairs.com

June 17, 2009

Eddie Bauer, the retail chain associated with rugged, outdoor clothing and fear, has found a mountain it couldn't climb, and says it will seek to sell itself under Chapter 11 bankruptcy protection. The firm is another apparent victim of the recession.

The company has entered into an asset purchase agreement with an affiliate of CCMP Capital Advisors, LLC ("CCMP Capital") to buy the Eddie Bauer's assets through a bankruptcy process, subject to an auction and Bankruptcy Court approval, for $202 million in cash, with working capital and similar adjustments.

CCMP Capital, a global private equity firm with significant experience in the retail and consumer sectors, intends to operate the business as a going concern with little or no long-term debt. CCMP Capital has agreed to:

• Keep the majority of the stores open and retain the majority of the employees;

• Support Company motions to maintain critical vendor relationships and payments; and

• Support Company motions to honor gift cards and the Company's loyalty reward program.

The sale process is expected to enable a sale of the business to CCMP Capital or any higher and better bidder approved by the court on an accelerated basis, thereby transforming the business into a financially stronger entity with substantially less debt and a better position for the future. The company said it currently anticipates completing the sale process in 60 days or less.

The company said all of its operations, including its 371 stores, catalog operations and its online sites are open and serving customers. The company plans to conduct business as usual through the process and has asked for court approval to continue paying product vendors and employees as usual. It said it intends to honor customer gift cards, returns and loyalty program points.

"Eddie Bauer is a good company with a great brand and a bad balance sheet," said Neil Fiske, the company’s CEO. "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."

Eddie Bauer has secured a commitment from its existing revolving credit lenders, Bank of America, N.A., GE Capital Corporation and CIT Group/Business Credit, Inc. for so-called Debtor-in-Possession (DIP) financing of $90 on an interim basis and $100 million based on final court order, which it believes will provide ample liquidity to meet its ongoing obligations during the sale process.

In April 2009, the company negotiated an amendment with its senior term loan lenders that provided short-term relief on its loan covenants. The company explored various paths for restructuring its balance sheet, but said it was ultimately unable to reach an agreement.

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