Moody's rates Eddie Bauer loan Ba3

Moody's Investors Service said it assigned a prospective Ba3 rating to Eddie Bauer Inc.'s new $300 million guaranteed secured term loan and a prospective Ba3 senior implied rating.

The outlook is stable.

The proceeds of the term loan will be distributed to pre-petition general unsecured lenders in conjunction with the company's planned exit from Chapter 11 in June. The ratings are prospective until the company emerges from bankruptcy. Upon emergence, the company also expects to have in place a $150 million revolving credit exit facility, which will not be rated.

Moody's said the Ba3 senior implied rating reflects the company's established and well recognized brand name; its multi channel retail format which includes retail stores, catalog, and e-commerce; and its solid free cash flow generation, and leverage and coverage metrics that are strong for the rating category.

The rating also considers the nature of the events that led to it filing for Chapter 11 in 2003 along with its parent company Spiegel, Inc. which were largely a result of a deterioration of Spiegel's credit card business and to a much lesser extent weak 2001 performance of Eddie Bauer. In addition, the rating encompasses the nature of the liabilities assumed by Eddie Bauer as a part of the bankruptcy process; these are predominantly a result of its guarantee of parent company obligations incurred to finance other subsidiaries' operating issues.

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