Published: Thu, October 11, 2018
Business | By Eloise Houston

Sears May Be Days Away From Bankruptcy

Sears May Be Days Away From Bankruptcy

Negotiations between Sears Chief Executive Officer Eddie Lampert and the company's special board committee are at a standstill over the committee's refusal to approve Lampert's rescue plan, the sources said. Reports circulated that the company is talking to advisers and banks in preparation for a bankruptcy filing.

Sears, an icon of American retailing since the 19th century, has struggled to appeal to consumers in recent years, losing customers and financial strength in the process. It has suffered in the last decade because it did not specialize and was overtaken by online competition from Amazon.com Inc and other retailers. The stock, which traded above $100 a decade ago, has fallen to less than $1 in the past year.

On Wednesday, Sears stock tumbled 30% to 41 cents, after the Wall Street Journal reported that it hired advisors to prepare it for a bankruptcy filing. 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.

"The journey to running a member-centric company on a consistently profitable basis has taken far longer than we expected", Lampert wrote in a lengthy blog post.

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.

Last month, ESL Investment, the hedge fund owned by Lampert, urged the retailer to sell $1.5 billion more in real estate and restructure $1.1 billion in debt to avoid bankruptcy, according to the filing with the Securities and Exchange Commission.

In May, Sears said it plans to shut 72 locations by the end of third quarter to stem losses in the face of deepening financial distress. Lampert bought Sears in 2004 and merged it with Kmart, in which he had a controlling stake, the next year. The company is now $5.6 billion in debt, has closed more than half its 2,000 stores since 2004, already sold off most of its major brands, and has seen its shares reduced to penny stock status within the past few weeks. Seritage Growth Properties, which has master leases on 230 Sears stores, slid 4 per cent, CBL & Associates Properties lost 1.1 per cent and Pennsylvania REIT was down 0.5 per cent.

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