Eddie Bauer flirting with bankruptcy as it seeks new debt deal

Pummeled by falling sales and shrinking profit margins, outdoorsy retailer Eddie Bauer (EBHI) said in a regulatory filing that it could receive a vote of no confidence from its auditors unless it can rework the terms of a $225 million loan.

Like many retail chains, Eddie Bauer has had to slash prices to entice skittish shoppers who'd rather pay down debt or add to their savings than buy another pair of khakis. That has taken a big bite out of its bottom line. It has also bruised its balance sheet, inflating the company's ratio of debt to equity. Its creditors are worried and its accountants are waving red flags.