Sears: Fate hangs in balance at bankruptcy hearing

by Bamidele Ogunberu Posted on January 8th, 2019

Sears Holdings and Kmart could soon join the graveyard of deceased American retailers if they can’t reach a last-minute deal to save themselves in bankruptcy.

Sears Holdings, which owns the two retailers, likely will reveal Tuesday whether it will consider a controversial offer by its chairman and largest investor to keep a shrunken version of the company alive.

Without a deal, liquidation appears imminent. It could even proceed within weeks.

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.

With the company teetering on the edge of implosion, attorneys for Sears will appear before a federal bankruptcy judge in New York at 10 a.m. to provide updates on the company’s asset bidding process.

The retailer received an acquisition offer from chairman and former CEO Eddie Lampert’s hedge fund, ESL Investments, that would keep about 425 stores open and 50,000 employees working.

But that deal includes a mix of financing that Sears advisers have reportedly rejected as insufficient. It also included a controversial measure that would release ESL from liability for past deals that may have enriched the hedge fund at the expense of other Sears creditors.

Sears and ESL have been silent since the retailer missed a Friday deadline to report whether it would consider Lampert’s offer, which his firm valued at $4.4 billion. Both companies have declined multiple requests for comment since then.

If the company deems the bid “qualified” to compete in an auction for the company’s assets, that process is expected to unfold Monday.

Liquidators, which specialize in the dismantling of bankrupt companies, are expected to compete 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.

Leave a Reply