Sears gets a lifeline, retailer gets one last shot at survival
It ain’t over yet.
In a last ditch effort to save the iconic, but embattled retailer, Sears chairman Eddie Lampert’s bid is still alive, as reported by The Wall Street Journal
On Tuesday, Sears bankruptcy lawyer Ray Schrock told Judge Robert Drain of the U.S. Bankruptcy Court in White Plains, New York that the retailer will move forward with its planned auction set for January 14.
However, the decision was made on the condition that Lampert’s hedge fund ESL Investments provide a $120 million deposit by Wednesday (tomorrow) afternoon, Schrock added.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| SHLD | GLOBAL X FDS DEFENSE TECH ETF USD | 38.96 | -0.28 | -0.71% |
The new developments avert, for now, liquidation plans that were expected to be announced today.
In a statement to FOX Business, an ESL spokesperson reiterated that while it appreciates the court’s support, its “proposal provides substantially more value to stakeholders than would be the case in liquidation and is the only option to save an iconic American retailer and up to 50,000 jobs.”
“We believe in Sears and will continue to do everything we can to ensure that it has a profitable future,” ESL added.
Last Friday, ESL put in a $4.4 billion bid to buy the struggling retailer with plans to keep 425 stores open throughout the country. But that bid was previously rejected by an independent board of Sears advisers.
According to the Journal, some board members questioned Lampert’s ability to fully fund the bid, which prompted the condition of a deposit.
Plus, many of Sears’ unsecured creditors, including landlords and suppliers, were reportedly unhappy with the former CEO’s bid, claiming it only benefits him and his hedge fund. Many of them were pushing for the 126-year-old to liquidate instead.
Schrock told the Journal that Sears is “moving forward, and looking forward to an auction on Jan. 14, and very hopeful for a great result.”
Even with the deposit, however, it is unclear whether ESL will be named the winner of the auction next week or not. And, according to Schrock, even if they don’t, a portion of the $121 million deposit won’t be returned to the hedge fund but instead be held by the estate.
CLICK HERE TO GET THE FOX BUSINESS APP
Todd Feinsmith, co-chair of the Bankruptcy Practice Group at Pepper Hamilton LLP, told FOX Business that despite the back and forth, it is still “very possible that a deal will be made” if Lampert improves his bid.
“He has much to lose. The sticking point with the current bid is that it is insufficient to cover the administrative costs of the bankruptcy, including the fees of lawyers and other professionals. In part, this is because there is a large ‘non-cash’ component to Lampert’s current bid — namely, the part of Lampert’s bid which provides for a waiver of approximately $1.3 billion in debt he holds against Sears. Debt relief is one thing, but cash is king in a bankruptcy, and creditors want to get paid,” Feinsmith said.
What’s more, he said the demise of Sears overall would be “very bad news” for other retailers in malls across the country as many rely on “anchor tenants” such as Sears to generate foot traffic.
“[But] on the other hand, online retailers such as Amazon would benefit because they would pick up additional market share from former Sears customers.”