From: ASAP
Spiegel, Inc. announced that it has taken a significant step toward completion of its restructuring by filing its proposed joint plan of reorganization (the Plan) and related disclosure statement with the U.S. Bankruptcy Court for the Southern District of New York.
The Plan contemplates that the business will be reorganized around the Eddie Bauer division of Spiegel, Inc., establishing a new parent company, Eddie Bauer Holdings, Inc. Eddie Bauer is a premium outdoor-inspired casual wear brand which specializes in offering distinctive clothing, accessories and home furnishings for men and women. Eddie Bauer will continue to serve its customers through its stores, catalogs and Internet site and be headquartered in Redmond, Washington.
"We are pleased to be submitting this Plan to the Court, which reflects the combined efforts and extensive negotiations between Spiegel, Inc., its Creditors' Committee and its majority shareholder as we worked together to maximize value for Spiegel, Inc.'s creditors," said Bill Kosturos, interim chief executive officer and chief restructuring officer for Spiegel, Inc and managing director with Alvarez and Marsal. "Having reached agreement with a broad base of our economic stakeholders, we believe that this Plan will serve as a sound platform as we work with the Court and our stakeholders toward acceptance and implementation of the Plan."
Fabian Månsson, president and chief executive officer for Eddie Bauer, Inc. stated, "We have made significant progress throughout the restructuring process, reducing our cost structure and positioning Eddie Bauer to be a stronger competitor providing best-in-class customer service and product. As a result, the profitability of the Eddie Bauer business improved substantially in 2003 and 2004. I am particularly encouraged by the strong support of the Plan from our Creditors' Committee and in their desire to participate in the company's future as equity holders."
Upon approval by the Court of the disclosure statement, Spiegel, Inc. will solicit votes on the Plan from those stakeholders who are entitled to vote on the Plan.
The Plan is subject to supplementation, modification and amendment prior to confirmation.
Plan of Reorganization
The key elements of the proposed plan of reorganization include:
- Spiegel, Inc.'s general unsecured creditors, excluding Spiegel Holdings, Inc. and its affiliates, will recover approximately 90 percent of their allowed claims through a combination of cash and common stock. Spiegel, Inc. estimates that approximately $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 approximately 52 percent cash and 48 percent equity.
- A settlement agreement reached with Spiegel Holdings, Inc. and its affiliates will provide a cash payment of $104 million that will be distributed to all qualified unsecured creditors on a pro rata basis. This amount is included in the recovery estimates noted above. The settlement agreement also includes the allowance and specifies the treatment of approximately $200 million of claims held by Spiegel Holdings, Inc. and related parties.
- A new corporate structure will be formed. Spiegel, Inc. will transfer its interest in Eddie Bauer, Inc. and its subsidiaries and other affiliated support companies to Eddie Bauer Holdings, Inc. Spiegel, Inc. also will transfer its interest in Spiegel Acceptance Corporation and Financial Service Acceptance Corporation to Eddie Bauer Holdings, Inc. These companies will emerge as reorganized entities. On the effective date, Eddie Bauer Holdings, Inc. will be the new parent company of the Eddie Bauer business. Eddie Bauer Holdings, Inc. will operate as an independent business, with a separate board of directors independent of Spiegel, Inc.
- Spiegel, Inc.'s creditors, with certain exclusions, will initially receive 100 percent of the equity in the emerging company, Eddie Bauer Holdings, Inc. Eddie Bauer Holdings, Inc. plans to register its class of common stock with the Securities and Exchange Commission and have its shares approved for trading on NASDAQ.
- Assets of the Debtors' Chapter 11 estates not transferred to Eddie Bauer Holdings, Inc. or its subsidiaries will be transferred to a trust (Creditor Trust) established for the benefit of creditors.
- The recovery estimate takes in account that qualified general unsecured creditors would receive their pro rata share of (1) corporate cash, (2) the cash settlement payment from Spiegel Holdings, Inc., (3) cash raised through the incurrence of $300 million in debt, (4) common stock of Eddie Bauer Holdings, Inc. and (5) beneficial interests in the Creditor Trust.
- As part of the Plan, Eddie Bauer has decided to pursue a new strategic direction for its Eddie Bauer Home division, focusing on home products through licensing agreements rather than operating its own retail and direct business dedicated to home. As a result, 34 Eddie Bauer Home stores will close, with the majority of the store closings expected to occur in the second half of 2005. This move will better utilize Eddie Bauer's resources and allow the brand to focus solely on its core apparel and accessories business.
- The plan provides for substantive consolidation of the Debtors' estates. Accordingly, most creditors holding claims that have the same status will receive the same recovery regardless of which Debtor incurred the debt.
- All of the shares of Spiegel, Inc. will be cancelled for no consideration.
- A "convenience class" will be created for creditors with smaller claims who will receive all distributions in cash.
The company expects a hearing to be held on its disclosure statement in U.S. Bankruptcy Court on March 29, 2005.
Please note that this press release is only a summary and is based on Spiegel, Inc.'s current estimate of the amount of claims that will be allowed by the bankruptcy court. Stakeholders of Spiegel, Inc. are urged to read the proposed plan of reorganization and the draft disclosure statement as well as any amendments or supplements to those documents for details on the planned distributions and other items that will affect them. A copy of the company's court documents, including the proposed plan of reorganization and the accompanying draft disclosure statement, can be accessed through the Spiegel, Inc. Web site at www.thespiegelgroup.com under the heading - Reorganization Information.
This press release does not constitute either an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to approval of the Disclosure Statement by the Court or qualification under the securities laws of any such state.
February 2005
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