Spiegel's plan of reorganization confirmed

By Caroline Salls

Pittsburgh, May 25 - Spiegel, Inc.'s plan of reorganization was confirmed Wednesday by the U.S. Bankruptcy Court for the Southern District of New York, according to an Eddie Bauer Inc. news release.

The plan establishes Eddie Bauer Holdings, Inc. as the new parent company of the Eddie Bauer division of Spiegel.

Under the plan, unsecured creditors will receive a 90% recovery in cash, the stock of the new company and interests in a trust.

The reorganization plan includes:

* Spiegel's general unsecured creditors, excluding Spiegel Holdings, Inc. and its affiliates, will recover about 90% of their allowed claims through a combination of cash and common stock. Spiegel estimates that about $1.28 billion of general unsecured creditors' claims will be satisfied in this manner, including bank debt and trade payables. Based on current estimates, each recovery will be comprised of 52% cash and 48% equity;

* A settlement agreement reached with Spiegel Holdings and its affiliates will provide a cash payment of $104 million that will be distributed to qualified unsecured creditors. This amount is included in the recovery estimates above. The settlement agreement also includes the allowance and specifies the treatment of about $200 million of claims held by Spiegel Holdings and related parties;

* Spiegel will transfer its interest in Eddie Bauer and its subsidiaries and other affiliated support companies to Eddie Bauer Holdings. Spiegel also will transfer its interest in Spiegel Acceptance Corp. and Financial Service Acceptance Corp. to Eddie Bauer Holdings. These companies will emerge as reorganized entities. On the effective date, Eddie Bauer Holdings will be the new parent company of the Eddie Bauer business. Eddie Bauer Holdings will operate as an independent business, with a separate board of directors independent of Spiegel;

* Spiegel's creditors, with certain exclusions, will initially receive 100% of the equity of the emerging company, Eddie Bauer Holdings;

*Assets not transferred to Eddie Bauer Holdings or its subsidiaries will be transferred to a trust established for the benefit of creditors;

* Eddie Bauer Home division will now focus on home products through licensing agreements rather than operating its own retail and direct business. As a result, 34 Eddie Bauer Home stores will close;

*The plan provides for substantive consolidation. Most creditors holding claims that have the same status will receive the same recovery regardless of which debtor incurred the debt;

* Spiegel's shares will be cancelled for no consideration;

* Convenience class from small creditors will be paid in cash.

Spiegel is a Downers Grove, Ill., specialty retailer. It filed for bankruptcy on March 17, 2003. The Chapter 11 action is case number 03-11540.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.