The Spiegel Group has obtained access to $150 million of a $400 million debtor-in-possession facility led by Bank of America. Spiegel filed for Chapter 11 last week after it ran out of cash to pay back investors who held notes backed by credit card receivables. A banker familiar with the deal said discussions are being held with turnaround management firm Alvarez and Marsal. William Kosturos, managing director at Alvarez, is now interim ceo and chief restructuring officer. The asset-based DIP facility could be syndicated in a couple of weeks, the banker added.
A B of A official declined to comment on the structure of the deal. Fleet Retail Finance and The CIT Group also are underwriters on the credit. Full access to the $400 million DIP is subject to final approval by the Bankruptcy Court. Once approved, the company aims to emerge from Chapter 11 within a period of six to 12 months, a Spiegel spokeswoman said. A Fleet official declined comment. CIT officials could not be reached by press time.
Spiegel's credit-card business, which the company aggressively expanded several years ago, fell into trouble when sales started dropping and charge-offs climbed. According to the spokeswoman, the company significantly tightened credit grant procedures. "The lack of being able to do credit line extensions and grant new credit impacted the ability to do new sales," she said. "It's the chicken or the egg," she added, commenting on whether charge-offs or tightened restrictions were to blame for the company's credit card problems.