Eddie Bauer Holdings Inc. filed for Chapter 11 bankruptcy protection Wednesday..As part of the filing, the company has an agreement to sell its assets to private-equity firm CCMP Capital Advisors LLC.


The company said it has entered into an asset purchase agreement with an affiliate of CCMP Capital to buy the company's assets through a bankruptcy process, subject to an auction and Bankruptcy Court approval, for $202 million in cash, with working capital and similar adjustments. CCMP Capital, which has  significant experience in the retail and consumer sectors, intends to operate the business as a going concern with little or no long-term debt. CCMP said it plans to keep a majority of the retailer's employees and operate a majority of its stores. It also said it would support the company's efforts to continue to pay suppliers and honor gift cards while it operates under bankruptcy court protection.

Eddie Bauer has secured a commitment from its existing revolving credit lenders, Bank of America, N.A., GE Capital Corporation and CIT Group/Business Credit, Inc. for so-called Debtor-in-Possession (DIP) financing of $90 on an interim basis and $100 million based on final court order, which it believes will provide ample liquidity to meet its ongoing obligations during the sale process.

The company noted that in April 2009, it negotiated an amendment with its senior term loan lenders that provided short-term relief on its loan covenants. The company said it explored various paths for restructuring its balance sheet, but was ultimately unable to reach an agreement.

“Eddie Bauer is a good company with a great brand and a bad balance sheet,” said Neil Fiske, president and CEO of Eddie Bauer. “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.”


He added, “We have made good progress on our turnaround strategy of returning Eddie Bauer to its heritage as an active outdoor brand and have exciting new product launches on the way to market, including First Ascent, our return to expedition-grade outerwear and gear. Unfortunately, a crushing debt burden placed on the Company from the Spiegel reorganization in 2005, combined with the severe, prolonged recession, have left us with no choice but to use this process to reduce the debt load on the business”


Another buyer can still top the CCMP deal in a Delaware bankruptcy court, CCMP now plays the role of the “stalking-horse” bidder, meaning it has agreed to buy the assets on particular terms for a particular price. If CCMP gets outbid, it would be entitled to a breakup fee and its expenses on the deal.


Eddie Bauer said the sale process is expected to enable a sale of the business to CCMP Capital or any higher and better bidder approved by the Court on an accelerated basis, thereby transforming the business into a financially stronger entity with substantially less debt and a better position for the future. The company currently anticipates completing the sale process in 60 days or less.


New York-based CCMP , which has about $9.5 billion under management, was formerly J.P. Morgan Partners until separating from the bank in 2006. It has a number of holdings in the retail sector, including the Quiznos sandwich chain and Vitamin Shoppe Industries.


The clothing retailer posted a net loss of $44.5 million for its most recent quarter and has $187.9 million in long-term debt. The company had been negotiating with holders of $75 million of its senior notes to convert that debt to equity. Shares have tumbled in recent weeks following rumors of a potential bankruptcy.


Founded in 1920, Eddie Bauer was known from the 1950s to the 1980s for its down jackets, mountaineering parkas and expedition gear. Then, in 1988, Spiegel Inc. bought the company and transformed it from an outdoor-wear and -gear store into a retailer focusing on women's casual clothes. In 2003, Spiegel filed for bankruptcy protection, and two years later Eddie Bauer was spun off.