Spiegel closer to emerging from 2-year bankruptcy

Controlling shareholder, retailer likely to make deal

February 18, 2005|By Becky Yerak | Becky Yerak,CHICAGO TRIBUNE

Nearly two years after its financial collapse, Spiegel Inc. moved closer to emerging from bankruptcy yesterday, thanks to a settlement that the retailer is expected to reach with its controlling shareholder.

Spiegel, a Chicago-born catalog company whose last remaining asset is the Eddie Bauer casual clothing chain, plans to file a plan of reorganization as early as today, said David LeMay, a Chadbourne & Parke lawyer representing the unsecured creditors' committee.

The plan, a road map for where the company wants to go after bankruptcy, proposes to give ownership of the 140-year - old company to its creditors, which consist mostly of U.S. and German banks, LeMay said.

"The creditors' committee is enthusiastic about Eddie Bauer and taking an ownership role," he said, noting that the company emerging from bankruptcy will likely drop the Spiegel name and opt for something that includes Eddie Bauer.

The unsecured creditors are "very satisfied" with existing Eddie Bauer management, he said.

Spiegel's anticipated exit from insolvency was made possible by a deal reached with controlling shareholder and German billionaire Michael Otto. He'll pay $104 million to release himself from all claims related to the demise of Spiegel, The Wall Street Journal reported yesterday.

Otto is expected to forgo repayment of about $160 million in loans to Spiegel from his holding company months before Spiegel went under, the Journal said. He'll also give up his ownership of Spiegel. Creditors have long maintained that Otto improperly withheld information about Spiegel's ailing finances.

Spiegel filed for bankruptcy with more than $1.5 billion in debts in March 2003, hit hard by shrinking sales, credit card defaults and Securities and Exchange Commission charges that executives fraudulently withheld from investors concerns about the company's financial status.

The two years have been marked by job cuts, store closings, changes in management and auditors and efforts to rejuvenate its catalogs.

Last summer, Spiegel sold its 100-year-old namesake catalog and its Newport News direct business to a group consisting of senior Spiegel catalog management and Golden Gate Capital Corp., a San Francisco private equity firm with about $2.5 billion under management.

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