By  on March 19, 2009

Shares of Eddie Bauer Holdings Inc. lost nearly half their value Thursday after it revealed larger fourth-quarter losses and said it is at “significant risk” of violating covenants on a $225 million loan.


In the quarter ended Jan. 3, the Seattle-based specialty retailer’s losses widened to $127.5 million, or $4.13 a diluted share, from $18.2 million, or 59 cents a share, in the year-ago period. The loss in the quarter included a pretax, noncash charge of $144.6 million for asset impairment. Sales in the three months fell 5.7 percent to $369.9 million from $392.4 million as same-store sales slid 8.8 percent.

The company reported that the economic downturn has put it at “significant risk” of being in violation of the consolidated secured leverage ratio required by covenants in a $225 million loan, of which about $193 million is outstanding, during the first half of the year.

To avoid a going concern opinion from its auditors, the firm is seeking amendments to the loan agreement including “substantial up-front cash and payment-in-kind fees, a substantial increase in interest rates, as well as the issuance of warrants for the company’s stock.” The company said its lenders rejected two earlier proposals before agreeing in principle on the current amendment terms.

“We expect 2009 to be a very challenging, difficult year,” said chief executive officer Neil Fiske. “While the amendment we are seeking is expensive, it will give us a new level of covenants with considerably more room on the downside through the first quarter of 2010.”

Shares of the company tumbled in trading Thursday, the first session after the Wednesday-night announcement. Eddie Bauer stock finished the day down 36 cents, or 46.2 percent, at 42 cents. Their 52-week high, reached last Sept. 11, was $8.72.

For all of fiscal 2008, the company reported a loss of $165.5 million, or $5.38 a share, versus a loss of $101.7 million, or $3.33 a share, in 2007. Sales in the 12 months fell 2 percent to $1.02 billion from $1.04 billion.

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