Sears received another lifeline after the company’s chairman and largest shareholder Eddie Lampert promised to line up the necessary financing to keep the struggling department store chain afloat. (Jan. 8)
Sears is down to its final lifeline.
Sears Holdings, which owns its namesake department store chain and Kmart, on Wednesday reportedly received a last-minute offer that could save a shrunken version of the retailer from liquidation.
Chairman and largest investor Eddie Lampert’s hedge fund, ESL Investments, delivered a revised version of his proposal to acquire about 425 stores and keep 50,000 employees working, according to Reuters. His initial $4.4 billion proposal was rejected as inadequate.
Sears and ESL did not immediately respond to requests seeking comment.
Lampert faced a deadline of 4 p.m. Wednesday to come up with the new offer — otherwise Sears was likely set to almost immediately begin liquidating.
The offer gives the company at least five more days to consider its options.
Sears plans to hold an auction on Monday for the company’s assets. The company has already closed hundreds of stores in recent years, including dozens in recent weeks.
“The debtors definitely seem to be doing their best to make sure Eddie’s bid remains alive and remains in consideration,” said Ana Lucía Hurtado, senior distressed debt legal analyst at Reorg, which provides analysis on companies that are struggling to pay their bills.
His bid won’t come without a cost. Sears bankruptcy attorney Ray Schrock revealed Tuesday at a court hearing that Lampert would be required to place a $120 million deposit with his revised bid, nearly $18 million of which would be nonrefundable.
As Sears bleeds cash, its days are numbered unless Lampert’s deal is accepted.
It wouldn’t be the first time he’s kept the company alive. In fact, Lampert has extended billions in loans to the company over the last several years, including while he was serving as CEO.
Critics say he loaded Sears with debt that delivered payments to his hedge fund while refusing to authorize badly needed store investments and digital upgrades. But Lampert has said he was “fighting like hell” to keep the company alive.
“Our proposal provides substantially more value to stakeholders than would be the case in liquidation and is the only option to save an iconic American retailer and up to 50,000 jobs,” ESL said Tuesday in a statement. “We believe in Sears and will continue to do everything we can to ensure that it has a profitable future.”
Alix Brozman, distressed debt legal analyst at Reorg, said Lampert’s chances of delivering a viable bid are “very much still alive.”
But it’s unclear how he’ll fare at the auction, where bidders jockey for position.
“The auction process can be a very active process where bids are morphing into something new, where bidders try to make their bids better so they can be more competitive,” Hurtado said. “Ultimately it’s the debtors and management that decide what is the best bid.”
Once known for its iconic catalogs, appliances and department-store variety, Sears fell into disrepair over the last two decades, as stores steadily lost their pep and customers turned their attention to specialty alternatives and digital competition like Amazon.
The company filed for Chapter 11 bankruptcy protection in October, hoping to use the debt-cutting process to rid itself of burdensome leases, financial liabilities and costs. That process has already involved hundreds of store closings for a company that once had more than 3,000 locations.
But even impressive financial engineering wouldn’t give customers an immediate reason to begin shopping at Sears or its discount-store sibling Kmart, whose blue-light specials once lured customers looking to save a buck.
Liquidators, which specialize in the dismantling of bankrupt companies, are expected to compete alongside Lampert for the company’s assets.
Although bankrupt companies can consider the economic implications of their potential collapse, they are typically supposed to choose the course that serves the best interests of their creditors.
If Sears and Kmart are worth more dead than alive, their fates may be sealed.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
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