- The Washington Times - Tuesday, March 18, 2003

CHICAGO (AP) Spiegel Inc. yesterday became the latest retailer to file for Chapter 11 bankruptcy protection, a victim of falling sales at its nearly century-old catalog business and its Eddie Bauer stores, along with mounting credit card woes.
Spiegel lined up $400 million in bankruptcy financing and said its stores and catalog operations will remain open as usual as it begins a bankruptcy process it expects to last six months to a year.
William Kosturos, chief restructuring officer and interim chief executive, said after the Downers Grove, Ill.-based company's filing in New York that the process should be "relatively seamless to the customer."
"It's certainly going to be business as usual," he said in an interview. "With our obtaining financing of $400 million … I think we have sufficient liquidity to really look hard at the operation and to emerge as a very strong company at the end of the process."
Mr. Kosturos said the retailer is focused on retaining its customers and assessing what needs to be done in a reorganization.
But analysts said the parent of Eddie Bauer and Newport News fashions, and the Spiegel catalog must make swift improvements in bankruptcy, and could put the Eddie Bauer stores and other assets up for sale to raise cash.
"Spiegel has been on the edge for a long time," said retail consultant Sid Doolittle, a partner with Chicago's McMillan/Doolittle LLP. "Sales at Eddie Bauer have been on a slippery slope, and the Internet has taken a lot of market share away from existing catalog retailers.
"The whole catalog industry has been pecked away at by all the specialty catalogs over the last 15 to 20 years," he said. "They're one of the dinosaurs."
Another retail specialist, Madison Riley of the retail consulting firm Kurt Salmon Associates, said Spiegel's strong brand names for both its catalog and Eddie Bauer gives it an excellent chance to successfully reorganize.
Spiegel and its filing subsidiaries listed assets of $1.74 billion and liabilities of $1.71 billion as of Feb. 22.
The company follows such retailers as Kmart Corp., FAO Inc. and Montgomery Ward LLC into bankruptcy during a period of economic turmoil industrywide, although some experts say Spiegel's decline has roots in its 1988 acquisitions of outdoor-specialty retailer Eddie Bauer.
Spiegel was founded as a furniture store in downtown Chicago in 1865 by German immigrant Joseph Spiegel. It issued its first catalog in 1905, offering credit services through the mail.
It was acquired in 1982 by Germany-based Otto Versand, the world's largest catalog company, which later transferred its shares to a group of individual investors.
After seeing an increase in annual sales as recently as 2000, Spiegel's sales sank 9 percent in 2001 and 18 percent, to $2.3 billion, in 2002. At the same time, it was experiencing a growing problem with unpaid credit card bills that analysts said resulted from the economy's slump and Spiegel's failed gamble on faster credit growth.
The company has warned for the past month that it would have to file for bankruptcy unless new financing emerged. Mr. Kosturos took over as the company's top official Feb. 28, after Martin Zaepfel resigned as chief executive.
On March 7, the U.S. Securities and Exchange Commission accused it of violating securities laws by skipping quarterly filings last year to conceal its auditor's conclusion that it might not be able to stay in business.

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