Spiegel Files for Bankruptcy Protection

Spiegel Inc. (Downers Grove, Ill.), the embattled catalog retailer and parent of Eddie Bauer (Seattle), has filed for Chapter 11 bankruptcy protection.

The company, which has been trying to sell its money-losing credit card unit since last year, said it has secured a $400 million debtor-in-possession financing package to keep operating all its businesses during its restructuring.

Analysts have said that Spiegel extended credit to too many higher-risk customers in order to drive retail sales and a foundering economy has led to a higher-than-normal rate of charge-offs due to unpaid credit card bills. That has forced Spiegel to pay back investors who bought securities backed by those credit card receivables. And now, with customers no longer able to use Spiegel's credit cards, sales will suffer further, Spiegel said in a news release, adding that it is seeking a third party to finance and service receivables generated for new credit cards for its subsidiaries.

Kurt Barnard, noted retail observer and analyst, said he expects the company now will sell Eddie Bauer, the retail chain it acquired in the late 1980s. “Eddie Bauer is one heck of a great name, far more than Spiegel itself,” Barnard told Crain's Chicago Business.

William Kosturos, the chief restructuring officer and interim chief executive Spiegel hired in February, told Reuters News Service he was “not ruling out anything right now.

“We're certainly going to look at the Eddie Bauer business and see what improvements we can make in the business,” he said, adding that it was too early to say if the company will close any stores. He said he expected the reorganization to take six months to 12 months.