Sears is preparing for bankruptcy as soon as this weekend
- by Xavier Trudeau
- in Financer
- — Oct 10, 2018
In August, the board said it was weighing an offer from Lampert that Sears should sell its Kenmore brand and said ESL might offer to buy it if it was willing to sell. Lampert divided the expanded company into dozens of units that competed for resources.
"For whatever reason, Sears' board said enough is enough", said Chad Brand, president of Peridot Capital Management, which holds Sears bonds. Sears's poor performance has always been an issue for owners, but landlords are split between those that are likely cheering the possibility of reclaiming its locations for more profitable tenants and those that see its potential bankruptcy as a negative tipping point.
At its peak in the 1960s, Sears sold everything from toys and auto parts to mail-order homes, and was a key tenant in nearly every big mall across the United States.
It warned in September for a second time that it could go out of business, hurt by falling foot traffic at its brick-and-mortar stores as customers shift online.
It is not clear whether Sears would survive a bankruptcy process.
However, Lampert wants to restructure the debt without filing for bankruptcy protection, because he views bankruptcy as risky for retailers, the Journal said. Instead, it was forced to liquidate last March, after creditors balked at providing a new lifeline to the company. 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.
In afternoon trading, Sears shares lost 6 percent to 58 cents.
Sears, whose stock price topped out at more than $120 a share in 2007, has struggled under the leadership of Eddie Lampert, a Wall Street prodigy who took control of Sears more than a decade ago and became its CEO in 2013. 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.
Lampert - Sears's largest shareholder and creditor and the owner of the hedge-fund ESL Investments - asked creditors last month to refinance $1.1 billion in debt before the October 15 payment, according to a filing with the U.S. Securities and Exchange Commission. Even after several rounds of store closures across the country in recent years, the holding company still operates around 500 Sears stores and 360 Kmart stores.
Shares of real estate investment trusts (REIT) exposed to Sears properties also fell Wednesday.
