Eddie Bauer files for bankruptcy protection

Eddie Bauer files for Chapter 11 bankruptcy court protection

By Mae Anderson

NEW YORK (AP) -- Clothing retailer Eddie Bauer Holdings Inc. filed on Wednesday for Chapter 11 bankruptcy court protection, the latest retail casualty of the recession.


It said CCMP Capital Advisors LLC has bid for its assets. Other buyers may also make bids while the company is under court protection.

The company said in its filing that it is seeking court protection because its financial position was creating uncertainty among vendors that supply its inventory and because its cash flow problems "could severely impede" its operations.

Eddie Bauer said it might not be able to comply with some covenants in its $225 million senior debt or have the cash under its line of credit to make vendor payments in the future.

Eddie Bauer considered refinancing of all or some of its debt, and it considered a reorganization, sale or liquidation through Chapter 11 bankruptcy protection, as well as continued operation on a modified business plan. It now hopes to be sold.

The outdoorsy clothing retailer had $476.1 million in assets and $426.7 million in debt at the time of the filing Wednesday with the United States Bankruptcy Court of the District of Delaware.

Bankruptcy rumors had been swirling as Bellevue, Wash.-based Eddie Bauer struggled with slumping sales amid the recession. It reported a loss for the first quarter of $44.5 million.

Eddie Bauer joins Circuit City, Linens 'N Things, Mervyns and other retail chains that have filed for bankruptcy court protection as consumer spending fell and the recession continued.

Peter J. Solomon Co. has been named financial adviser for the company and Alvarez & Marsal was named restructuring adviser.

Eddie Bauer and CCMP did not immediately return calls for comment.

Mich. gets hit hard in GM's latest plant closings

By KATHY BARKS HOFFMAN

LANSING, Mich. - As General Motors Corp. on Monday named the operations it would close or put on standby as it headed into bankruptcy, Michigan learned it would be taking the brunt of the bad news.

The list includes a truck assembly plant shuttered in Pontiac and engine and transmission plants shut down in Flint, Livonia and Willow Run. A Grand Rapids stamping plant also will close.

An Orion assembly plant will be placed on standby, as will a stamping plant in Pontiac.

Gov. Jennifer Granholm told CNN Monday that Michigan already has lost hundreds of thousands of automotive jobs and will be hurt by the bankruptcy.

She says "it's going to be a tough summer." Some GM workers already are on extended layoffs as the automaker trims production because of lower sales.

Jobless benefits available for Volusia

The federal government has approved disaster unemployment assistance for Volusia County residents who were recently impacted by the severe storms and flooding that hit the area.

Disaster Unemployment Assistance helps people who have become unemployed as a direct result of a declared disaster and who do not qualify for regular unemployment benefits. It also covers those who are self-employed and owners and workers of farms and ranches as well as those who fish for a living.

Individuals can apply online at www.floridajobs.org or www.fluidnow.com. They can also file by telephone at (800) 204-2418, Monday through Friday from 7:30 a.m. to 7 p.m. and on Saturday from 8 a.m. to 4 p.m.

GM Files Bankruptcy to Spin Off More Competitive Firm

By Linda Sandler, Chris Scinta, Bob Van Voris and Jeff Green

June 1 (Bloomberg) -- General Motors Corp., the world’s largest carmaker until its 77-year reign ended last year, filed for bankruptcy protection in the U.S. with a plan to create a 21st-century company that can compete in world markets.

GM reported $82.29 billion in assets and $172.81 billion in debt. The U.S. government will bankroll the transformation of the 100-year-old automaker, a victim of tumbling sales and higher gas prices. The U.S. plans to convert much of its $50 billion of loans to a 60 percent stake in the new entity, administration officials said. Today’s filing coincides with a deadline for GM to convince a government auto task force that it could reorganize out of court through debt and cost cutting.

“It’s been a long time coming, but the reality of a GM bankruptcy is still a bitter pill to swallow -- it’s a bit like the Titanic sinking,” said Stephen Pope, chief global strategist at Cantor Fitzgerald in London. “This is a step they should have taken more than a year ago, which could have put them in much better shape before the economy went down.”

Detroit-based GM is the largest manufacturer to file for bankruptcy, surpassing Chrysler LLC. The carmaker plans to launch a new company in 60 to 90 days, armed with vehicles from its Cadillac, Chevrolet, Buick and GMC units for the U.S. market. A federal bankruptcy judge would supervise the sale or liquidation of unprofitable brands, such as Saturn and Hummer, and at least 11 unwanted factories.

Lyondell Judge

The case was assigned to U.S. Bankruptcy Judge Robert Gerber, who also presides over the bankruptcies of Lyondell Chemical Co. and BearingPoint Inc. He also presided over the bankruptcy of Adelphia Communications Corp.

GM listed in its petition as its top creditors Wilmington Trust Co., representing bondholders owed $22.8 billion; International Union; the United Automobile, Aerospace and Agricultural Implement Workers of America, owed $20.6 billion; and Deutsche Bank AG, owed $4.44 billion.

One idle GM facility in the U.S. will be retooled to make small, fuel-efficient cars as part of an agreement with union workers, GM said May 29.

GM’s Saab unit is reorganizing in Sweden. The German government picked Magna International Inc., a Canadian car-parts maker, to buy GM’s Opel unit.

The Chapter 11 petition filed in federal court in Manhattan makes GM the third-largest bankruptcy in U.S. history, ranked by total assets, after Lehman Brothers Holdings Inc. and WorldCom Inc. Chrysler’s April 30 filing listed $39 billion in assets.

Chrysler Bankruptcy

Auburn Hills, Michigan-based Chrysler plans to transfer most of its assets to a new entity that would be run by Italy’s Fiat SpA. A federal bankruptcy judge in New York approved the deal last night.

Before declaring bankruptcy, GM got $19.8 billion in U.S. Treasury loans. Administration officials said yesterday it would advance $30 billion more, with another $9.5 billion from the Canadian government. A balance sheet in a GM securities filing last week showed total debt in the new GM of $17 billion, excluding obligations to suppliers and warranty programs and including $8 billion in Treasury loans.

The filing put the new-entity loan total from the U.S. and Canadian government at almost $60 billion.

Aside from the U.S. government’s equity share, GM’s pre- filing plan called for a worker health-care fund to get a 17.5 percent stake. Bondholders and other unsecured creditors would get 10 percent and warrants to buy another 15 percent.

Initial Trading

There would be no initial public trading of the shares, some of which will be given to the Canadian government in exchange for loans, an administration official said last week. The company might remain private for as long as 18 months, the official said, asking not to be identified.

GM, being larger than Chrysler, faces more obstacles in mopping up the creditor claims that remain in bankruptcy after the streamlined company is created. GM, reeling from almost $88 billion in losses since 2004, might not return to profitability if U.S. vehicle sales are below 10 million a year, the amount the administration said yesterday the new GM will need to break even.

“Any suggestion that an American corporate icon like GM could file for bankruptcy would have been laughable a few years ago,” said Lynn Hiestand, a lawyer specializing in restructuring with Skadden, Arps, Slate, Meagher & Flom LLP.

GM said in its filing that it owed former unit Delphi Corp. $110.9 million. Other key parts suppliers such as Robert Bosch GmbH, owed $66.2 million, Lear Corp., owed $44.8 million, and Johnson Controls Inc., with a $32.8 million claim, were among the automaker’s top dozen creditors.

Canadian Parts Maker

Magna International Inc., a Canadian car-parts maker leading a group that is expected to buy GM’s Opel unit, was owed $26.7 million, according to court papers. The GM board said in the filing that the asset sale to the U.S. Treasury is “expedient.” Auto Acquisition Corp. is the government entity that will own GM assets, according to the filing. The U.S. and Canada may provide the company with as much as $65 billion in bankruptcy loans, the GM board said, according to the petition

GM said in the filing that it has no objections to a bankruptcy filing by its Canadian unit. The company has $22 billion in bond debt and $20.6 billion in UAW obligations, according to court papers.

Saturn Brand

GM’s Saturn LLC and Saturn Distribution Corp. also filed for bankruptcy court protection today. The Chapter 11 petitions are the “only opportunity for preserving” the Saturn brand, according to the filing.

Today’s filing will trigger credit-default swaps protecting about $3.1 billion of GM debt, in the biggest settlement of the derivatives since September’s collapse of Lehman Brothers. Pricing reflected the risks last week as dealers charged about $8.7 million upfront and $500,000 annually to protect $10 million of debt.

GM had global liabilities of $176.4 billion as of Dec. 31, 2008. Banks such as JPMorgan Chase & Co. secured GM’s revolving loan of about $4.5 billion with inventory, receivables and factories, also providing a $1.5 billion term loan. The face value of its bonds was $27 billion.

The automaker has agreed to take ownership of five production facilities from bankrupt parts supplier Delphi, according to the UAW. The carmaker will employ all union workers at those locations as part of an accord with the union, according to a union document obtained by Bloomberg. The sites are in Saginaw and Grand Rapids, Michigan; Lockport and Rochester, New York; and Kokomo, Indiana.

North American Sales

The carmaker’s North American sales were $86.2 billion in 2008, compared with $34.4 billion in Europe, $20.3 billion in Latin America, Africa and the Middle East, and $17.8 billion in the Asia Pacific region, according to a regulatory filing.

GM sales dropped 33 percent in April.

The automaker was founded in 1908 by William “Billy” Durant, who bought more than 20 car companies before being ousted in a 1920 bailout by Pierre Du Pont and J.P. Morgan.

By the 1960s, GM controlled more than half the U.S. vehicle market. In 2008, it sold only 8.35 million cars worldwide, losing its place as the world’s No.1 automaker to Toyota Motor Corp. as customers opted for the Japanese carmaker’s fuel- efficient Corolla and Camry brands instead of GM’s light trucks and Hummers.

GM’s shares traded at less than a dollar last week after Bloomberg News reported it would file for bankruptcy by today.

Lehman filed the biggest bankruptcy in September, listing assets of $639 billion. WorldCom collapsed in 2002 with assets of $103.9 billion.

GM’s bankruptcy petition was filed by Stephen Karotkin of New York law firm Weil Gotshal & Manges LLP, which is also advising Lehman.

The case is In re General Motors Corp., 09-50026, U.S. Bankruptcy Court for the Southern District, New York (Manhattan).