11th-hour deal allows Sears to remain open - for now

Andrew Cummings
January 9, 2019

Were Sears to liquidate its assets, it would become one of the most high-profile victims in the wave of bankruptcies that has swept the retail sector in the last few years, as the explosion in online shopping exacerbates the fierce price competition facing brick-and-mortar stores.

As CCN reported, The 126-year-old retailer had hoped to receive approval from a bankruptcy judge to proceed with liquidation after advisers rejected a $4.4 billion takeover bid from Lampert and ESL.

One of the biggest sticking points is ESL's plan to pay for part of the deal by forgiving $1.3 billion in debt that Sears owes the hedge fund, which includes fees owed on stores sold to Seritage Growth Properties.

Lampert's bid said he plans to offer jobs to 50,000 Sears and Kmart employees.


The deal was reached after days of "virtually round-the-clock negotiations", Sears attorney Ray Schrock told the court.

That bid had included $1.3bn (£1bn) in financing from three institutions, ESL said in a statement.

The creditors have argued that forgiveness of his debt should not be accepted as part of the bid, because Lampert loaned Sears the money when he was CEO. When the company was in court November 27 to finalize bankruptcy financing, a hedge fund affiliated with ESL swooped in to ignite a last-minute bidding war for the right to lend to it.

A judge still needs to approve the agreement.


In general, bankruptcy courts would rather not liquidate a company if there's a chance to keep it alive and its workers employed, said David Stowell, professor of finance at Northwestern University's Kellogg School of Management. In some cases, shutting down a company is "the only thing you can reasonably do" to ensure creditors recover as much money as possible, Stowell said. That raised concerns in the negotiations since the maneuver might not be allowed in court, the sources said, given ongoing investigations of Lampert's pre-bankruptcy deals, which the hedge fund manager maintains were proper.

"Lampert has a legacy to think about, and to walk away and acknowledge he made mistakes must be really tough".

Any deal would require the Bankruptcy Court's approval, and a hearing to approve the auction results has been set for January 31.


Other reports by iNewsToday

FOLLOW OUR NEWSPAPER