Eddie Bauer files for bankruptcy protection

Struggling retailer Eddie Bauer Holdings Inc., which began as a Seattle fishing shop, later outfitted the first American to climb Mt. Everest and made thousands of newfangled down jackets and sleeping bags for the military during World War II, filed for Chapter 11 bankruptcy protection on Wednesday.

Still known for outdoorsy clothing but serving a distinctly more domestic clientele of students and other mall patrons, the company said Wednesday that a bidder has agreed to keep the majority of its 371 stores open and honor its gift cards and hold onto most employees.

The company said CCMP Capital Advisors LLC has bid $202 million in cash for its assets. Other buyers may also make bids while the company is under court protection.

Bankruptcy rumors had been swirling as Bellevue, Wash.-based Eddie Bauer struggled with slumping sales amid the recession. It reported a loss for the first quarter of $44.5 million as sales fell 16 percent to $179.8 million.

It had $476.1 million in assets and $426.7 million in debt at the time of the filing Wednesday with the U.S. Bankruptcy Court of the District of Delaware.

Since becoming CEO in 2007, Neil Fiske tried to turn the company around, cutting jobs and lowering expenses. But the company continued to falter as the economy soured.

"Now you have too many stores chasing shoppers who are more cash- and credit-constrained than any time post-World War II," said retail consultant Burt Flickinger III, managing director of Strategic Resource Group.

Eddie Bauer said in a statement that CCMP has agreed to operate the company as a going concern with little or no long-term debt. CCMP did not immediately return a call for comment.

"Eddie Bauer is a good company with a great brand and a bad balance sheet," CEO Fiske said in the statement. "This process will allow the business to emerge with far less debt, positioned for growth as the economy recovers and as our new products gain traction."

The company said in its filing that it is seeking court protection because its financial position was creating uncertainty among its suppliers and because its cash flow problems "could severely impede" its operations. And it said it might not be able to comply with some covenants in its $225 million senior debt or have the cash under its line of credit to make vendor payments in the future.

Eddie Bauer considered refinancing of all or some of its debt, and it considered a reorganization, sale or liquidation through Chapter 11 bankruptcy protection, as well as continued operation on a modified business plan. It now hopes to be sold.

The company expects to complete the sale process within 60 days.

Eddie Bauer said it has a commitment from its existing lenders for so called debtor-in-possession financing of $90 million.

Eddie Bauer joins Circuit City, Linens 'N Things, Mervyns and other retail chains that have filed for bankruptcy court protection as consumer spending fell and the recession continued.

Founder Eddie Bauer opened the company in 1920 in Seattle. In 1945, after making more than 50,000 jackets for the military, it launched a mail-order catalog, according to its Web site.

After Bauer retired, the company shifted more toward casual apparel and was bought by General Mills Inc. in 1971 and then by Spiegel Inc. in 1988. After Spiegel filed for Chapter 11 bankruptcy protection in 2003 and most of its assets were sold, the remainder of the company was reorganized in 2005 as Eddie Bauer Holdings Inc.

CCMP specializes in buyouts and growth equity investments. Its other retail investments include Cabela's, Guitar Center, 1-800-flowers.com, Quiznos, Pinnacle Foods and Crosstown Traders.