Friday, 24 May, 2019

Sears explores bankruptcy filing even as CEO scrambles to avoid it

Sears store in Garden City NY. REUTERS  Shannon StapletonMore Sears store in Garden City NY. REUTERS Shannon StapletonMore
Ginger Lawrence | 11 October, 2018, 02:41

Sears was at one point America's largest retailer and its largest employer. Lampert is the company's biggest shareholder.

The company's shares are trading at around 59 cents and are down more than 90 per cent in the last 12 months. The company is in talks for financing that would fund operations through bankruptcy, said the person, who asked not to be identified because the discussions are private.

He writes that Sears occupies a significant amount of space, but that about three-quarters of its stores are outside the U.S.'s Top 50 markets, so while many landlords rent space to the retailer, that exposure is relatively small. Lampert bought Sears in 2004 and merged it with Kmart, in which he had a controlling stake, the next year.

Just two weeks after unveiling an unorthodox debt-reduction plan and on the same day that it added a restructuring specialist to its corporate board comes word via the Wall Street Journal that Sears Holdings has hired a boutique advisory firm to craft a bankruptcy plan that could be filed as early as this week.

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Sears and Kmart had 89,000 employees as of February 3 of this year, according to a company filing.

But many flailing retailers have tried that tactic before and failed (see: Toys "R" Us). The stock, which traded above US$100 a decade ago, has fallen to less than $1 in the past year. Sears warned it could go out of business as it waits for approval from the committee on the deal.

Lampert has been willing to pour additional cash into the company in return for debt backed by real estate or other hard assets. The 125-year-old retailer, based in Hoffman Estates, Illinois, has relied on piecemeal deals and infusions from the hedge fund manager to offset billions of dollars in losses.

Sears has more than $11 billion in cumulative losses since 2011, and its annual sales have dropped almost 60% in that period to $16.7 billion, according to Dow Jones. The Sears special committee had also been weighing a prior offer from Lampert to acquire the retailer's Kenmore appliances brand and its home services business for as much as $480 million. The Journal also reported the billionaire Lampert, who has rescued the company in the past, could make the payment to avert an in-court restructuring.