Investors are saying a price increase on a $300 million exit financing for clothing chain Eddie Bauer may be necessary to wrap up syndication. The six-year term loan was launched two weeks ago at LIBOR plus 2 1/2%, but to get done, some buysiders are saying it will have to be priced up by 50 basis points. JPMorgan and GE Capital are leading the financing and Bank of America is leading a $150 million revolver that did not go to general syndication. The asset-based loan is a rollover of the debtor-in-possession financing (LMW, 5/27).
"Sure it will get done and typically, out-of-bankruptcy deals generally do well," one investor said of the deal. "You structure it, it should have a life." But he said the company may have problems down the line because its core audience is older males that do not repurchase clothes as often as other demographics.
Another investor said his group will not be touching the loan. He said some investors may be interested from a real estate perspective and the number of leases the company has, but from a retail standpoint, he does not like the brand value. The first investor went so far as to say that down the line, for the company to survive, it may need to be picked up by a large chain store and marked through that brand.
Eddie Bauer, formerly under parent company Spiegel, entered into voluntary bankruptcy in February 2003. Jim Brewster, Spiegel's senior v.p. and cfo., previously told LMW that Spiegel's financial problems were a result of issues with credit entities from a subsidiary, First Consumer National Bank. The bank is in the final stages of liquidation.
In April 2004 Spiegel hired what was then Miller Buckfire Lewis Ying & Co. to look into companies that might be interested in acquiring the Eddie Bauer business. Spiegel received six offers but the creditors committee thought they were toward the lower end of valuation and considered taking it to auction, but Brewster said the company was worried it would still not get the right price. Spiegel nixed those plans but did sell Newport News for $25 million in June 2004 and Spiegel Catalog in July 2004. Pangea Holdings put in the initial bid for Newport News, but Golden Gate Capital Management was the majority sponsor for that deal and also sponsored a leveraged buyout for Spiegel Catalog. "I don't think any of those businesses worked well when part of a group," Brewster had said. Calls to an Eddie Bauer spokeswoman were not returned. Brewster could not be reached for comment about the potential pricing increase.