NEW YORK — Already under investigation by the Securities and Exchange Commission and in violation of numerous financial covenants, Spiegel Inc. on Friday turned to turnaround expert William Kosturos, a managing director at Alvarez & Marsal, to help it reverse its failing fortunes.
Kosturos was named chief restructuring officer and interim chief executive of the firm. As ceo, he will succeed Martin Zaepfel, who is retiring after a stormy tenure at Spiegel that began in July 2001 following his work as deputy chairman of Otto Versand GmbH, the German catalog giant that has controlling interest of Spiegel.
In turning to Kosturos, Spiegel is emulating actions taken by Warnaco Group, which hired Alvarez & Marsal principal Tony Alvarez as chief restructuring officer in May 2001 and promoted him to ceo six months later after the departure of Linda Wachner from that post.
While Spiegel hasn’t sought bankruptcy court protection, as Warnaco did in June 2001, the Downers Grove, Ill.-based catalog company faces daunting obstacles if it is to escape such a fate.
Meanwhile, Warnaco emerged from Chapter 11 as a stand-alone firm last month, and Alvarez has remained at the helm.
Michael Otto continues as chairman of Spiegel and of Otto Versand.
Additionally last week, Spiegel promoted James Brewster to senior vice president and chief financial officer of the company, the same title he had at Spiegel’s Newport News subsidiary. Brewster succeeded James Cannataro, who left the troubled firm last month to become executive vice president of Nintendo’s Nintendo of America unit. The absence of a cfo prevented Spiegel from certifying its quarterly results when they were belatedly filed with the Securities and Exchange Commission last week. Those documents, covering three quarters up to the one ended Sept. 28 last year, showed a company awash in red ink — $139.9 million of it, for the first nine months of its fiscal year, versus a $19.5 million year-ago loss. Sales dropped 17.1 percent to $1.54 billion during that period.
Spiegel, already the subject of an informal SEC investigation because of its failure to file quarterly results in a timely fashion, told the regulatory body in its Form 10-Q that, out of compliance with various financial covenants and unable to obtain new financing, it faced a payout, or amortization, event that would leave it unable to fund its operations.
“These matters raise substantial doubt about the company’s ability to continue as a going concern for a reasonable period of time,” the firm reported.
Spiegel also said that its board had initiated a search for a permanent ceo.