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 Eddie Bauer Holdings Inc., which filed
for Chapter 11 bankruptcy protection, is poised for a successful
turnaround because the retailer's management is already working with a
private equity firm in a prepackaged arrangement, turnaround consultant Renee Fellman tells The Deal.The retailer filed a prepackaged bankruptcy and is set to be acquired by private equity firm CCMP Capital Advisors LLC for $202 million or a higher bidder at auction. The prepack is key because at the moment DIP financing is very hard to come by for retailers. "There is definitely a trend in the market right now," says Fellman in a phone interview. "If a retailer doesn't have a prepack before filing for bankruptcy, it will probably be liquidated. That's why the right management is key." One recent successful prepackaged bankruptcy was by Mrs. Field's LLC. Recent retail bankruptcies that couldn't get a prepack include Fortunoff Holdings LLC, Steve & Barry's LLC, Gottschalks Inc. and KB Toys. For a full list, see "Retailers and bankruptcy." Besides financing a bankruptcy, there are other issues executives restructuring retailers should focus on, including the product, point-of-sale, real estate and customer service, says Fellman. Eddie Bauer's management has already convinced CCMP Capital to keep most of the retailer's 371 stores open and retain most employees. Fellman says: "In my experience, several factors determine a successful outcome in Chapter 11. But the two most important are the brand and management. That will distinguish an Eddie Bauer from a Circuit City. Eddie Bauer has a competent CEO, Neil Fiske, who is very focused on the firm's financial situation and he has done a lot of planning. "Eddie Bauer has a strong brand and a careful eye on operations. Fiske has the type of experience needed and seems to have a good relationship with CCMP, so it's likely that he will see Eddie Bauer through its recovery." The Heico Cos. LLC's Michael Heisley explained at the TMA/The Deal's Distressed Investing Conference in January that managing a distressed company successfully requires a different psychology and collaboration. See the video below. - Maria Woehr Private capital video
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