This article from Cardforum: SPIEGEL FILES FOR BANKRUPTCY Spiegel Inc. and its principal subsidiaries, troubled by high card chargeoffs and poor sales, today filed for voluntary Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York. The Downers Grove, IL-based retailer also announced it had secured a $400 million, senior secured debtor-in-possession financing facility from Bank of America N.A., Fleet Retail Finance Inc. and The CIT Group/Business Credit Inc. In the filing, Spiegel and its subsidiaries listed total assets with a book value of $1.74 billion and total liabilities of $1.71 billion. The DIP financing will be enough to fund operations during the reorganization progress, Spiegel said in a statement today. The bankruptcy filing came less than a week after the retailer announced that six securitizations totaling $2.1 billion in bank card and private-label receivables went into early amortization because of poor performance (CardLine 3/11). At that time, Spiegel said it would no longer honor private-label cards issued by its subsidiary, First Consumers National Bank, for merchant units Eddie Bauer, Spiegel Catalog and Newport News. Those merchants, however, recently began issuing private-label cards directly, but only a few customers are believed to have them currently. Spiegel said it continues to seek a third-party processor or to run the new program. FCNB and its subsidiary are not part of the bankruptcy filing since FCNB is being liquidated under the terms of a May 2002 consent order entered into with the Office of the Comptroller of the Currency. FCNB recently discontinued charging privileges on its Visa and MasterCard portfolios. FCNB has two million active private-label card accounts and 700,000 active bank card accounts, a Spiegel spokesperson says. The developments raise concerns about Spiegelâ??s and its affiliatesâ?? ability to pay investors in its card-backed securities, says William Black, vice president and senior analyst in Moodyâ??s Investors Service Structured Finance Group. The fact that cardholders can no longer use their cards means that Spiegel will have a slowly declining pool of receivables backing the securities, Black says. As a result, bondholders will receive a smaller portion of the cash allocation as the portfolio shrinks, he says. Itâ??s not clear what effect the bankruptcy filing will have on a U.S. Securities and Exchange Commission investigation into Spiegelâ??s alleged concealment of its auditorâ??s statement questioning the companyâ??s ability to continue as a going concern (CardLine 3/10). http://www.cardforum.com/cgi-bin/readstory.pl?story=20030317CLDN595.xml
