Eddie Bauer, the Washington-based retailer, filed for bankruptcy on June 16, 2009, approximately four years after the company emerged from the Spiegel bankruptcy.  What started as one store opened by Eddie Bauer in 1920, grew to a clothing retailer with over 500 stores and catalogs reaching over 100 million customers.   During its history, the company was owned by General Mills in 1971, and then Spiegel in 1985.  As stated in its Declaration in Support of its First Day Motions (the “Declaration”),  Eddie Bauer was spun-off from Spiegel under Spiegel’s Plan of Reorganization in May of 2005.

The Company’s Financials

According to Eddie Bauer’s Voluntary Bankruptcy Petition (the “Petition”), the company has assets worth approximately $476 million against debts of $426 million.  The Petition lists the following companies as its ten largest unsecured trade creditors:

  1. RR Donnelley Receivables … $855,526
  2. Expeditor’s International … $700,000
  3. Boom … $464,976
  4. Midland Paper … $299,469.97
  5. Vipdesk Connect Inc. … $250,000
  6. Fry, Inc. … $225,000
  7. Stageplan Inc. … $217,807
  8. Newgistics … $200,000
  9. Scheiner Commercial … $178,572
  10. Epsilon … $150,000

The company generates approximately half of its sales revenue ($444 million in 2008), from retail sales, a quarter from outlet store sales ($253 million), and a quarter from direct sales ($274 million).  Combined, net merchandise sales in 2008 reached $971 million.  Add in royalties and various joint ventures, and Eddie Bauer’s total revenues for 2008 reached $1.02 billion.

Events Leading to Bankruptcy

Eddie Bauer’s Declaration provides a good explanation as to why it filed for bankruptcy.  In order to emerge from the Spiegel bankruptcy, the company took on $300 million in debt, assumed Spiegel’s pension and retirement benefits, and took possession of various Spiegel operations and distribution facilities.  With the onset of the recession, discretionary consumer spending contracted and Eddie Bauer’s sales declined significantly.  Further, the company claims to have lost “brand identity” due to its move away from its traditional “outdoor outfitter heritage,” instead focusing on casual apparel.  This shift in focus, the company claims, led to a drop in sales from $440 in sales per square foot to $230 in sales per square foot.

The 363 Sale

Over six months prior to filing for bankruptcy, Eddie Bauer hired Peter J. Solomon Company to serve as its investment adviser regarding the sale of assets.  The company and its advisers contacted fifty-five potential buyers, twenty of which entered into confidentiality agreements in order to conduct due diligence.  Five companies submitted letters of intent and in the end Eddie Bauer’s board of directors selected Rainier Holdings LLC as the stalking horse bidder.  (To read a prior post from this blog on stalking horse bidders, click here); (to read a prior post on 363 sales in bankruptcy, click here).


Through various turnaround initiatives, along with the sale of substantially all of its assets, Eddie Bauer hopes to revitalize its business.  The company claims to have already trimmed $48 million in operating costs during 2008.  Further, like retailers before it, Eddie Bauer is returning to its more traditional roots – launching a heritage collection with field and stream-based merchandise along with “expedition inspired” clothing.

This bankruptcy proceeding is before the Honorable Mary F. Walrath, former Chief Judge of the United States Bankruptcy Court for the District of Delaware.