Source: TheDeal.com
 
Retailer Spiegel Inc. won confirmation Wednesday, May 25, of a reorganization plan that gives its creditors full ownership of the scaled-down company and allows it to emerge from bankruptcy.
 
Judge Burton Lifland in the U.S. Bankruptcy Court for the Southern District of New York in Manhattan approved the retailer's plan to reorganize around its Eddie Bauer business, said an attorney who attended the hearing.
 
There were no major objections and the plan is due to take effect by June 17, he said.
 
Besides full ownership - minus dilution from stock used for management compensation - the creditors are projected to get at least $600 million in cash. The payout would come from a $300 million exit loan, $200.9 million from cash on hand and $104 million from a settlement with Spiegel's former parent company.
 
Debtor counsel Shearman & Sterling LLP didn't return calls.
 
The Downers Grove, Ill., retailer is reorganizing around its Eddie Bauer Holdings Inc. subsidiary under the debt-for-equity swap. Spiegel has sold its flagship catalog division for $31 million and its Newport News Inc. women's business for $28.6 million since it filed for Chapter 11 on March 17, 2003.
 
The retailer locked in a $150 million working-capital exit revolver from a group led by Bank of America NA. BofA initially committed to a $400 million debtor-in-possession loan and a $150 million letter of credit, but that was reduced to a $150 million revolver.
 
Spiegel also agreed to a $300 million, six-year term loan to pay down creditors with a group fronted by units of J.P. Morgan Chase Bank NA, GE Capital Corp. and Credit Suisse First Boston. J.P. Morgan Chase is providing $150 million and GE Capital is adding $90 million, while CSFB has a $60 million commitment.
 
The plan was amended to create a creditors' trust to house proceeds from pending litigation. Spiegel is suing audit firm KPMG LLP for $100 million for alleged professional malpractice.
 
The suit, which alleges that KPMG failed to adequately disclose the retailer's financial woes to investors, is pending in the Circuit Court of Cook County, Ill.
 
No hearings have been set.
 
Investment bank Miller Buckfire & Co. LLC is advising.
 
Andrew Tenzer, James Garrity and Marc Hankin are debtor counsel at Shearman & Sterling in New York.
 
Howard Seife, David LeMay and Douglas Deutsch represent the creditors in New York at Chadbourne & Parke LLP.