Bankruptcy Judge Approves Financing To Keep Sears Open

by Ike Obudulu Posted on October 16th, 2018

White Plains, New York, USA : A bankruptcy judge on Monday approved $300 million in financing to keep department store chain Sears Holdings Corp open through the holiday season, giving the century-old retailer that once dominated U.S. shopping malls a chance to remain in business.

Sears filed for Chapter 11 bankruptcy protection in White Plains, New York earlier on Monday with a plan to close about 142 of its 700 stores by year-end and sell its best-performing stores in an auction in January to a buyer that will keep them operational.

The bankruptcy filing by the parent of Sears, Roebuck and Co and Kmart Corp follows a decade of revenue declines, hundreds of store closures, and years of deals by billionaire Eddie Lampert in an attempt to turn around the company he acquired in 2005 for $11 billion.

Lampert, who stepped down as Sears CEO on Monday but will remain chairman, had pledged to restore Sears to its glory days, when it owned the tallest building in the world and companies that included a radio station and Allstate insurance.

But the company, which has close to 70,000 employees, has not turned a profit since 2011, and critics say Lampert let the stores deteriorate over the years, even as he bought the company’s stock and lent it money, making him its largest shareholder and creditor.

“For somebody of my generation, Sears Roebuck was a big deal… Sears has been dying for many years, it has been obviously improperly run for many years, and it’s a shame,” U.S. President Donald Trump told reporters on Monday. U.S. Treasury Secretary Steven Mnuchin was on Sears’ board of directors between 2005 and 2016.

Lampert and his hedge fund ESL Investments Inc own just under of 50 percent of Sears’ shares and are its biggest creditor, with about $2.5 billion owed to him and ESL. He has so far not disclosed whether he has turned a profit or loss since he invested in Sears following years of complex financial engineering at the company.

Negotiating Bankruptcy Financing

Beyond the $300 million bankruptcy financing package from its existing lenders that Sears secured on Monday, the retailer said it was negotiating an additional $300 million in bankruptcy financing from Lampert’s ESL.

Sears listed $6.9 billion in assets and $11.3 billion in liabilities in documents filed in the U.S. Bankruptcy Court in the Southern District of New York. Its debt to Pension Benefit Guaranty Corp, a U.S. government agency overseeing the retirement benefits of former Sears workers, was not disclosed in the bankruptcy filing.

Under the bankruptcy plan, Lampert’s executive role will be replaced by a three-person committee. Mohsin Meghji, a managing director of the M-III Partners corporate advisory firm, was appointed chief restructuring officer.

Sears had earlier announced the separate closing of 46 unprofitable stores, and said Monday that is expected to be completed next month.

Sears is also weighing the sale of “a large portion” of its stores and said they could be bought by Lampert’s hedge fund in a bankruptcy auction.

In bankruptcy court on Monday, Andy Dietderich, an attorney for Sears investor Bruce Berkowitz, formerly a member of the retailer’s board of directors, expressed concern that Lampert would have too much control over the bankruptcy process.

“Most of the company is gone,” Dietderich said.

Shareholders generally lose all or most of their investment when a company files for bankruptcy, and the ability of Sears to escape liquidation will depend on the willingness of creditors and suppliers to keep the company afloat. Strong sales in the upcoming holiday season will be key in determining that.

The largest U.S. toy retailer, Toys ‘R’ Us, tried to emerge from its 2017 bankruptcy filing but was forced to liquidate six months later after creditors lost confidence in its turnaround plan.

Store Closures, Asset Sales

Major Sears suppliers, such as Whirlpool Corp and Electrolux AB, sought to allay fears about their exposure to the bankrupt retailer. Whirlpool said Sears’ bankruptcy will have a limited impact on its business, while Electrolux said it did not assess a need for material one-time costs as an immediate consequence of Sears’ debt restructuring.

Meanwhile, Sears and Kmart stores are open for business. The company said it is continuing to pay employees’ wages and benefits and is working with vendors to ensure its shelves remain stocked.

“The company believes that a successful reorganization will save the company and the jobs of tens of thousands of store associates,” Sears said in a statement.

Shares in Illinois-based Sears closed at about 41 cents on Friday, down from over $100 in the years after hedge-fund star Lampert, once hailed as another Warren Buffett, merged it with discount store Kmart in a $11-billion deal in 2005.

Sears dates back to the late 1880s. Its mail-order catalogues with merchandise from toys, medicine and gramophones to automobiles, kit houses and tombstones made it the Amazon.com Inc of its time.

The iconic retailer gradually lost its shine, however, as consumers increasingly turned to e-commerce and brick-and-mortar rivals such as Walmart Inc and Target Corp.

“It’s a sad thing that they are going bankrupt. But they didn’t run it quite well, and that’s the consequence of not running something right,” said 61-year-old retiree Paul Thompson, a Kmart customer at one of its stores in Bridgehampton, New York.

Lampert’s Investments

One of the lingering questions for investors has revolved around the value of Sears’ assets, which include prime real estate.

The company sold 235 of its best stores for $2.7 billion to a Lampert-created company, Seritage Growth Properties. Lampert also became Land’s End Inc’s biggest shareholder when the clothing manufacturer was spun out of Sears in 2014.

Those deals could be subjected to new scrutiny by Sears’ creditors in bankruptcy court.

“When you go into a bankruptcy, you’re living in a fish bowl and every transaction will be looked at and examined,” said Corali Lopez-Castro, Managing Partner at law firm Kozyak Tropin & Throckmorton.

In an earlier attempt to avoid bankruptcy, Sears last year sold its Craftsman tool brand to power tool maker Stanley Black & Decker for $900 million. It also signed a deal to sell Kenmore appliances on Amazon.com.

Over the summer, a special board committee Sears created was resisting a rescue offer from Lampert to acquire assets from it, including its Kenmore appliance name.

Sears store closing list: 142 more Sears, Kmart locations closing in Chapter 11 bankruptcy

Sears Holdings plans to close another 142 unprofitable stores, as part of its Chapter 11 bankruptcy, on top of 46 store closings announced in August.

Liquidation sales at the additional stores are expected to begin within two weeks, according to a court filing.

“As we look toward the holiday season, Sears and Kmart stores remain open for business and our dedicated associates look forward to serving our members and customers,” Sears chairman Eddie Lampert said in a statement.

The company has 687 stores remaining, including Kmart locations.

It’s possible more stores – even all stores – could end up closing if the company fails to reach a viable restructuring agreement in bankruptcy.

The company has closed several hundred stores in recent years as it tries to stabilize its finances amid deteriorating sales. The most recent round, announced Aug. 23, involved plans to close 13 Kmart stores and 33 Sears locations in November.

Here is the list of 142 new store closings, according to the court filing. (In parentheses: other entities listed as lease assignee or co-tenants):

Kmart

Arkansas

2821 East Main St Russellville, AR 72801-9801

California

215 W Hanford/Armona Rd Lemoore, CA 93245-2302

1351 E Hatch Rd Modesto, CA 95351-5010

375 E Alessandro Blvd Riverside, CA 92508-2463

3247 W Noble Ave Visalia, CA 93277-1841

912 County Line Rd Delano, CA 93215-3823

2530 S Euclid Ave Ontario, CA 91762-6619

3968-A Missouri Flat Road Placerville, CA 95667-5240

Florida

900 N W 76 Boulevard Gainesville, FL 32606-6747

12350 Sw 8Th Street Miami, FL 33184-1510 (Goodwill)

Georgia

400 Crosstown Road Peachtree City, GA 30269-2915

6239 Turner Lake Road Covington, GA 30014-2064

Illinois

3701 Broadway St Quincy, IL 62301-3721 (Ruby Tuesday)

4210 N Harlem Ave Norridge, IL 60706-1277

5000 23Rd Ave Moline, IL 61265-4599

Indiana

430 W Ridge Rd Griffith, IN 46319-1095 (El Centro Mall)

723 3rd Ave Jasper, IN 47546-3639

Iowa

2803 E Kanesville Blvd Council Bluffs, IA 51503-1004

1111 N 2nd Cherokee, IA 51012-1287

2307 Superior Webster City, IA 50595-3165

Kansas

400 South Broadway Salina, KS 67401-4005

7836 State Ave Kansas City, KS 66112-2417

Kentucky

600 C W Stevens Blvd Grayson, KY 41143-1190

Northridge S/C Us Hwy 127 Russell Springs, KY 42642-4559

Louisiana

7000 Veterans Memorial Metairie, LA 70003-4497

Maine

417 Main Street Madawaska, ME 04756-1197

Maryland

835 Solomons Island Rd N Prince Frederick, MD 20678-3912

6163 Oxon Hill Road Oxon Hill, MD 20745-3108

Michigan

06600 M-66 North Charlevoix, MI 49720-9505

1025 M-24 Lake Orion, MI 48360-1429

Missouri

2901-5 N Belt Hwy St. Joseph, MO 64506-2006

7100 NW Prairie View Rd Kansas City, MO 64151-1630 (Zeller Auto Repair)

1 Flower Valley Shp Ctr Florissant, MO 63033-1644

New Jersey

779 Delsea Dr N Glassboro, NJ 08028-1435

New York

987 Route 6 Mahopac, NY 10541-1709

8363 Lewiston Road Batavia, NY 14020-1236

2590 Military Rd Niagara Falls, NY 14304-1506

349 Orchard Park Rd West Seneca, NY 14224-2634

93 West Campbell Rd Schenectady, NY 12306-6800

North Carolina

1530 East Broad Street Statesville, NC 28625-4302

4500 Western Blvd Raleigh, NC 27606-1814 (Choice Auto Repair)

1001 Patton Ave Asheville, NC 28806-3643

Ohio

15891 State Rt 170 East Liverpool, OH 43920-9633

17840 Bagley Rd Middleburg Heights, OH 44130-3401

Oregon

3955 S W Murray Blvd Beaverton, OR 97005-2316 (Glowing Greens LLC)

Pennsylvania

720 Clairton Blvd/Rte 51 Pleasant Hills, PA 15236-4517

528 W Plank Road Altoona, PA 16602-2802

1502 South Fourth St Allentown, PA 18103-4949 (Floreff LLC & Nathan & Alison LLC)

1000 Nutt Rd Phoenixville, PA 19460-2200

880 Butler Street Pittsburgh, PA 15223-1319

1170 Mae Street Hummelstown, PA 17036-9185

100 Tarentum Rd New Kensington, PA 15068-4670

1180 Walnut Bottom Rd Carlisle, PA 17013-9160

3205 Lincoln Hwy Thorndale, PA 19372-1012

111 Hulst Dr, Ste 722 Matamoras, PA 18336-2115

South Carolina

129 West Butler Avenue Mauldin, SC 29662-2534 (Mauldin at Butler LLC)

2302 Cherry Rd Rock Hill, SC 29732-2165

Tennessee

6909 Maynardville Pike Ne Knoxville, TN 37918-5325

Virginia

6364 Springfield Plaza Springfield, VA 22150-3431

118 Waller Mill Rd Williamsburg, VA 23185-2946 (New Oriental Crafts LLC)

2712 W Main St Waynesboro, VA 22980-1618

Washington

1001 E Sunset Drive Bellingham, WA 98226-3510

West Virginia

1701 4Th Ave W Charleston, WV 25387-2415

Wyoming

4000 East 2nd Street Casper, WY 82609-2385

Sears

Alabama

1001 Rainbow Dr Gadsden, AL 35901-5376

Arizona

2250 El Mercado Loop Sierra Vista, AZ 85635-5204

3150 S 4Th Ave Yuma, AZ 85364-8104

6515 E Southern Ave Mesa/East, AZ 85206-3711

7611 W Thomas Rd Phoenix-Desert Sky, AZ 85033-5433

3177 Chandler Village Dr Chandler, AZ 85226-

California

1700 Stoneridge Dr Pleasanton, CA 94588- (Lands’ End)

100 Santa Rosa Plz Santa Rosa, CA 95401-6381 (Lands’ End)

3333 Bristol St Costa Mesa, CA 92626-1811 (Lands’ End)

1011 W Olive Ave Merced, CA 95348-2422

5901 Florin Rd Florin, CA 95823-2302

3751 S Dogwood Ave El Centro, CA 92243-

100 Vintage Faire Mall Modesto, CA 95356-0559

100 Los Cerritos Mall Cerritos, CA 90703-5421

1401 N Montebello Blvd Montebello, CA 90640-2584

3001 Ming Ave Bakersfield, CA 93304-4145

Colorado

10785 W Colfax Ave Lakewood, CO 80215-3807

7001 S University Blvd Centennial, CO 80122-1599 (Lands’ End)

Connecticut

1201 Boston Post Rd Sp 2095 Milford, CT 06460- (Lands’ End)

850 Hartford Tnpk Waterford, CT 06385- (Lands’ End Inc.)

Florida

733 N Highway 231 Panama City, FL 32405-5302

300 Mary Esther Blvd Mry Est/Ft Wltn Bch, FL 32569-1693

1050 S Babcock St Melbourne, FL 32901-3022

3800 Us Highway 98 N Ste 500 Lakeland, FL 33809-3824

303 Us Hwy 301 Blvd W Bradenton, FL 34205-7991

3100 Sw College Rd Ste 300 Ocala, FL 34474-8449

Idaho

460 N Milwaukee St Boise, ID 83704-9122

Illinois

3340 Mall Loop Dr Joliet, IL 60431-1057

Indiana

1251 Us Highway 31 N Greenwood, IN 46142-4503

6780 W Washington St Indianapolis, IN 46241-2999

3401 S Us Highway 41 Terre Haute, IN 47802-4154

Kentucky

4807 Outer Loop Louisville-Okolona, KY 40219-3200

2625 Scottsville Rd Bowling Green, KY 42104-4477

Maryland

15700 Emerald Way Bowie, MD 20716-2200

400 N Center St Westminster, MD 21157-5140

10300 Little Patuxent Pkwy Columbia, MD 21044-3341 (Lands’ End)

Massachusetts

1235 Worcester Rd & Natick, MA 01760 (Lands’ End)

Michigan

900 Briarwood Cir Ann Arbor, MI 48108-1618 (Lands’ End)

2100 Southfield Rd Lincoln Park, MI 48146-2250

Minnesota

425 Rice St St Paul, MN 55103-2123

12431 Wayzata Blvd Minnetonka, MN 55305-1925 (Lands’ End)

Nevada

1245 W Warm Springs Rd Henderson, NV 89014-8740

New Hampshire

50 Fox Run Rd Ste 74 Portsmouth, NH 03801-2858 (Lands’ End)

New Jersey

1500 Highway 35 Middletown, NJ 07748-1831 (Lands’ End)

1750 Deptford Center Rd Deptford, NJ 08096-5282 (Lands’ End)

New Mexico

6600 Menaul Blvd Ne Ste 700 Coronado, NM 87110-3447

New York

75 W Route 59 Ste 100 Nanuet, NY 10954-2701 (Lands’ End)

1111 Franklin Ave Garden City, NY 11530-1617 (Lands’ End)

600 Lee Blvd Yorktown Hts, NY 10598-1142

Rt 394 & Hunt Blvd Lakewood, NY 14750

North Carolina

703 N Berkeley Blvd Goldsboro, NC 27534-3444

400 Cross Creek Mall Fayetteville, NC 28303-7244

11033 Carolina Place Pkwy Pineville, NC 28134-8370 (Lands’ End)

Ohio

5320 Youngstown Rd Niles, OH 44446

Oklahoma

6929 S Memorial Dr Tulsa Woodland Hls, OK 74133-2035

9800 Sw Washington Square Rd Washington Sq, OR 97223-4455 (Lands’ End)

3201 W Main St Norman, OK 73072-4847

Oregon

827 Lancaster Dr Ne Salem (Lancaster), OR 97301-2929

Pennsylvania

5522 Shaffer Rd Ste 129 Dubois, PA 15801-3304

100 Neshaminy Mall Bensalem/ Crnwls Hts, PA 19020-1607

2300 E Lincoln Hwy Langhrn /Oxford Vly, PA 19047-1824 (Lands’ End)

Tennessee

7600H Kingston Pike West Town, TN 37919-5604 (Lands’ End)

2800 N Germantown Prkway Cordova, TN 38133 (Lands’ End Inc.)

2801 Wilma Rudolph Blvd Clarksville, TN 37040-5011

2100 Hamilton Place Blvd Chattanooga, TN 37421-6006

Texas

7508 N Navarro St Victoria, TX 77904-2654

2901 S Capitol Of Texas Hwy Austin/Barton Creek, TX 78746-8101

3450 W Camp Wisdom Rd Southwest Ctr, TX 75237-2504

2501 Irving Mall Irving, TX 75062-5161

6301 Nw Loop 410 Ingram, TX 78238-3824

1000 E 41st Austin, TX 78751-4859

6002 Slide Rd Lubbock, TX 79414-8555

2002 S Expy 83 Harlingen, TX 78552-

2605 Preston Rd Frisco, TX 75034-9434

Virginia

100 Newmarket Fair Mall Hampton, VA 23605-1406

Washington

3500 S Meridian Ste 900 Puyallup, WA 98373-3722

West Virginia

9520 Mall Rd Westover/Morgantown, WV 26501-8524

Wyoming

701 Se Wyoming Blvd Casper, WY 82609-4213

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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