Winning bidder for Eddie Bauer snapping up distressed retailers

Seemingly undeterred by one of the most difficult retail environments in decades, the San Francisco private-equity firm that won a bankruptcy-court auction for Eddie Bauer's assets Friday has been shopping around for retail businesses.

Golden Gate Capital bought women's clothier J.Jill from Talbots at a bargain-basement price of $75 million last month, and it tried for department-store chain Gottschalks but lost to a group of liquidators in March.

Now, it plans to take over Bellevue-based Eddie Bauer, the beleaguered outdoor-clothing chain that got its start in Seattle 89 years ago.

Golden Gate's all-cash bid of $286 million will be presented for bankruptcy-court approval Wednesday and is expected to close early next month, Eddie Bauer said.

Golden Gate agreed to keep at least 300 of Eddie Bauer's 370 North American stores and most of its employees. Stockholders in Eddie Bauer are not expected to get anything when proceeds of the auction are distributed.

With $9 billion under management, Golden Gate has bought or invested in more than a dozen retail companies in the past five years. Golden Gate paired with Sun Capital Partners in 2007 on a $285 million offer for Eddie Bauer rejected by shareholders.

"I think everyone on the creditors' side is happy," David Pollack, a Philadelphia bankruptcy attorney whose clients hold leases on about 100 Eddie Bauer stores, said of the auction's outcome. "There's going to be money to pay a lot of things. They're going to keep open most stores, and employees of 300 stores are going to continue to have their jobs."

But New York-based Iconix Brands, another bidder interested in operating Eddie Bauer, said it was considering its legal options Friday after losing the auction. Iconix owns and licenses such brands as Danskin, London Fog and Rocawear.

"We are disappointed in the process and we intend to object," Iconix spokeswoman Maria Dolgetta said in an e-mail.

Among the other bidders were apparel company VF, which wanted Eddie Bauer's trade name and Web site, and liquidator Gordon Brothers Group, which wanted the company's inventory to sell off.

Eddie Bauer filed for Chapter 11 bankruptcy protection last month in Delaware, blaming debt it was forced to take on after emerging from the Spiegel bankruptcy in 2005, as well as the current recession.

Eddie Bauer announced at the time that New York private-equity investor CCMP Capital made an initial cash offer of $202 million for its assets in a so-called stalking-horse bid, meaning CCMP would have to buy the clothing chain if no other bidders topped its offer at the auction.

CCMP had said it would keep most of Eddie Bauer's stores and management team, including Chief Executive Neil Fiske, who took over the company two years ago after leading a turnaround of Bath & Body Works. Golden Gate has not made public its plans for Eddie Bauer's management and could not be reached for comment. Also, an Eddie Bauer spokeswoman said Fiske and other company executives would make no comment.

Golden Gate kept J.Jill's management team but did the opposite two years ago when it bought a majority stake in the Express clothing chain from Limited Brands, replacing then-CEO Jay Margolis with Michael Weiss, who had led Express until 2004.

Eddie Bauer employs about 8,600 people, including several hundred at its downtown Bellevue headquarters. It had $476.1 million in assets and $426.7 million in debt at the time of its bankruptcy filing.

"My understanding is that, in addition to paying $286 million, Golden Gate is assuming something in the order of $100 million of Eddie Bauer's debt," said Brian Huben, a Los Angeles bankruptcy attorney who represents shopping centers where Eddie Bauer has stores, including Macerich-owned Redmond Town Center.

"It's unlikely that everyone will get paid 100 cents on the dollar," Huben said of Eddie Bauer's creditors. "What the percentages will be for various types of creditors I couldn't tell you, but there will be some people who won't be paid in full."

Bankruptcy attorney Pollack said he talked with Golden Gate Principal Peter Morrow, a Bain & Co. alum, at the auction and came away with a favorable impression.

"They were looking for opportunities and thought this was a really good opportunity," Pollack said. "He seemed very earnest in his desire to turn this around and make a go of it."

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com