Eddie Bauer files for bankruptcy protection

Eddie Bauer Holdings Inc. (EBHI), the once-proud seller of expensive, sporty outerwear, today filed for Chapter 11 bankruptcy protection, becoming the latest retail chain destroyed by the worst financial crisis since the Great Depression.

Under the terms of the bankruptcy, Eddie Bauer has agreed to sell its assets to CCMP Capital Advisors LLC., a private equity firm, for $202 million in cash. The investor, which supported debtor-in-possession financing of $100 million, plans to retain most of Eddie Bauer's employees and continue to operate most of its 371 stores.

Eddie Bauer has struggled for years under a crushing debt load. Back in March, my colleague Zac Bissonnette was skeptical of the company's plans to go "back to its roots by: introducing a new line of high-performance outdoor gear, and scaling back on the casual apparel that has been getting crushed by weak consumer spending and competition." He argued that it was already too late for Eddie Bauer.

Of course, he was right.

Shares of the retailer had plunged amidst concerns of a possible bankruptcy. In the most recent quarter, Eddie Bauer had a net loss of $44.5 million. It has $187.9 million in long-term debt. Talks with holders of $75 million of its senior notes to convert that debt to equity went nowhere, according to The Wall Street Journal.

"Eddie Bauer is a good company with a great brand and a bad balance sheet," Neil Fiske, President and Chief Executive Officer of Eddie Bauer, said in a press release. "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."

Eddie Bauer expects the bankruptcy process to be completed quickly, he said.

CCMP, formerly JP Morgan Partners, has experience in retail investments. Among its holdings are the Quizno's sandwich chain and 1-800-flowers.com. It also helped turn around Burger King Holdings Inc. (BK) and Continental Airlines Inc. (CAL).
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