Eddie Bauer creditors win a round in court - Puget Sound Business Journal (Seattle):

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In setting a July 16 date to auctio n offEddie Bauer’s assets, U.S. Bankruptcy Judge Mary Walratyh ofthe U.S. Bankruptcy Court in Delaware agreed to not require any potential buyer to make a bulk bid forthe Instead, Walrath agreed with major creditors and debt holders that bids woulds be accepted for all or a portion of the Bellevue-basee retail chain’s assets. It’s too soon to know if this couldhinder ’s attempts to sell nearly all of its assetes to private equity firm LLC, of New A representative of Eddie Bauer who was not authorized to be quotedc by name said the company had always anticipated a flexible bid process and does not think that procesws will hamper attempts to complete the deal with Walrath’s decision is seen as significant by Opening up the bid process could encourage more bidders to participat and fetch a better price for the retailer’s they say.
Still, Cathy Hershcopf, a New York bankruptcg attorney working on behalf ofunsecurex creditors, said that it may be in the best interesg of Eddie Bauer for the company to continues as an ongoing concern. Hershcopf also noted, in an emai l response to questions about the that the judge gave EddieBauefr “maximum flexibility to consider all factors in comparing the That includes advantages of the CCMP bid and any othefr bids that would keep Eddi e Bauer operating as a going concern, she said. The , as a bond indentured trustee, is Eddie Bauer’s largest unsecured creditor. The bank has a $75 million claim.
The problem boilsd down to math forthe company’sz major unsecured creditors. With $240 millio n in secured loans and a bid from CCMPfor $202 attorneys representing The Bank of New York and othee unsecured creditors worry there won’t be enough from the asset sale to trickle down to them. Hershcopf noted that the secured and unsecurex creditors have different interests in thebankruptc case. Delaware-based bank FSB is the agentt for the termloan lenders, who are owed $200 million.
In legall papers filed with thebankruptcy court, the lendera also argued that a proposed sale price of $202 million for all of Eddies Bauer’s assets might fall short of maximizing the overall valuew of the assets. Wilmington Trust’s attorneys argue that in Eddide Bauer’s case, “the sum of the part may yield greater value than the They argued that a bulk bidding process forEddie Bauer’s was “problematic” and threatened to “chill robustf bidding.” A bulk asset deal with CCMP might make the best sense for keepingy Eddie Bauer in business, according to Wilmington Trust’a attorneys.
But they argued in court papers that limitinh potential buyers to only those interestecd in buying all ofEddies Bauer’s assets in one lot woule make a bidding war less likely and woulrd hamper attempts to get the best pricew for Eddie Bauer’s assets. In addition to Wilmingtonm Trust, Eddie Bauer owes more than $40 million in revolving loanes administered by Bank of Eddie Bauer filed for Chapte r 11 bankruptcy protection onJune 17. Private equity firm CCMP Capital Advisorz has offered to buyEddie Bauer’s asseta for $202 million, which is essentially the openin g bid in a bankruptcy court auction schedules for July 16.
If CCMP is not the winning bidder, the private equity firm is entitle to a fee ofnearlty $6 million. That would mean any bid or bids trumping the CCMP offefr would have to beabout $208 million. CCMP has said it wanta to continue to operate Eddid Bauer and would retaijthe company’s executive team and keep most of the retailer’z stores open. Eddie Bauer’s lenders argue that the retailer’ s assets can be easily broken down into including the Eddie Bauer brandf andintellectual property, real inventory and store leases.
The lendere say that buyers who woulx not have an interest in biddingh for all ofEddie Bauer’s assets in one lot may have interesft in some of the potentially fetching a greater total price than the $202 million offered by Eddie Bauer operates 370 stores. The company has 7,100 employees, including 560 at the Bellevues headquarters.