The Spiegel Group said it might have to file for chapter 11 bankruptcy protection if it cannot borrow enough money to pay investors back $2.2 billion in secured bonds sooner than expected.
Company spokesperson Debbie Koopman declined to further comment.
The early payback, known as an early amortization, was triggered by poor performance of the bonds’ collateral that was tied to its troubled credit card business.
Unless the cataloger and retailer can borrow enough money to pay off bondholders and keep operations going, Spiegel will be forced to reorganize in bankruptcy soon, it said.
Spiegel said Eddie Bauer, its catalog and Newport News are no longer honoring the private-label credit cards issued by First Consumers National Bank, Spiegel’s bank subsidiary.
Last week, U.S. securities regulators sued Spiegel, accusing the retailer of failing to make public in 2002 its auditor’s concerns about the company’s future.
According to news reports, bond insurer MBIA Inc., which had insured about $840 million of bonds issued by First Consumers National Bank, said it does not expect losses from the bonds.
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