CCMP makes bet on Eddie Bauer's brand allure

NEW YORK (Reuters) - U.S. outdoor apparel retailer Eddie Bauer Holdings Inc filed for bankruptcy protection on Wednesday, but may have found a white knight in a $202 million offer for the retailer from private equity firm CCMP Capital.

CCMP, which has invested in companies like Quizno's, 1-800-Flowers.com, Guitar Center and JetBlue Airways, said in an interview with Reuters on Wednesday that it was betting that the strength of Eddie Bauer's nearly 90-year-old brand could weather the U.S. recession.

In the past year many well-known retailers like Circuit City and Linens n' Things have been forced into liquidation for lack of a buyer, and even some that managed to sell assets to a buyer, like Goody's and Steve & Barry's, ended up filing for bankruptcy and liquidating a second time.

A CCMP executive, however, said he believes Eddie Bauer is in a different position than those retailers, and can be strengthened by a bankruptcy process that would help rid the retailer of a debt-heavy balance sheet.

"It's really an iconic outdoor American dual-gender brand," CCMP Managing Director Jonathan Lynch said. "We looked at it as a company returning to its roots where it had enjoyed tremendous success. We love the direction the company's going in today."

CCMP had looked at bidding on Eddie Bauer around the time of its prior bankruptcy in 2003 but chose not to do so then, Lynch said, saying the firm now believes the company is "in a different place" and doing business in a way that is more aligned with what its brand represents.

CCMP's Lynch said it was the classic "good company, bad balance sheet" situation.

"We view Eddie Bauer as a legendary brand," Lynch said. "What you need to do is fix the balance sheet in a way that allows this company to reach its full potential."

Eddie Bauer, which started as a sports shop in 1920 in Seattle, has been posting losses on falling sales this year. The company said in January it hired investment banking firm Peter J. Solomon Co for restructuring advice and has been working to cut costs and preserve cash.

The retailer emerged from Chapter 11 bankruptcy in 2005 after former owner Spiegel Catalog sought bankruptcy protection in 2003.

One thing that made it attractive to CCMP was that Eddie Bauer has multiple retail channels, such as the Internet, its retail stores and its catalog, Lynch said.

"You've got a store model that's absolutely validated," Lynch said. "You have a profitable business that's doing fairly well, particularly relative to its competitors in a difficult environment."

David Peress, chief investment officer of Hudson Capital Partners, a company that invests in distressed retail companies, said, "CCMP is paying $202 million, that's pretty close the breakup value of the business."

CCMP's bid, however, is subject to the bankruptcy auction process and the private equity firm could have some competition.

"We do know it's a highly valuable asset, and we do know that there has in the past been interest in it. We don't know whether others will choose to show up later or not," Lynch said.

Prior to the bankruptcy filing, Hilco Consumer Capital, a brand licensing specialist affiliated with the Hilco liquidation company, held talks with Eddie Bauer about acquiring the company, according to a person familiar with the matter last week.

The case is: In re Eddie Bauer Holdings, Inc., U.S. Bankruptcy Court, District of Delaware, No. 09-12099.

(Reporting by Emily Chasan, additional reporting by Chelsea Emery; Editing by Phil Berlowitz)