Business

/

ArcaMax

Facing liquidation, Sears gets $5 billion rescue bid from chairman

Lauren Zumbach, Chicago Tribune on

Published in Business News

Sears Chairman Edward Lampert has raised his bid to buy the bankrupt retailer's assets, submitting a proposal that could top $5 billion.

The new proposal would see Lampert's hedge fund, ESL Investments, take on up to $663 million in additional liabilities in an effort to strengthen its offer before a Monday bankruptcy auction. At stake? Whether the more than 125-year-old retailer, with hundreds of stores and tens of thousands of employees, will land another lifeline from Lampert, its former CEO, or face liquidation.

At a U.S. Bankruptcy Court hearing Tuesday, Hoffman Estates-based Sears Holdings Corp. agreed to consider Lampert's revised bid to keep the retailer alive alongside other offers for its assets.

The new bid, submitted with a required $120 million deposit, would see ESL take on $43 million in employee severance costs and cover payments for merchandise Sears ordered shortly before filing for Chapter 11 in October and goods ordered before the deal closes, according to a Thursday regulatory filing. The hedge fund also would acquire some additional assets, including 57 more real estate properties.

"We believe our proposal will provide substantially more value to stakeholders than any other option, in particular a liquidation, and is the best path forward for Sears, its associates and the many communities across the United States touched by Sears and Kmart stores," ESL said Thursday in an emailed statement.

After considering all bids for its assets at the bankruptcy auction Monday, Sears will aim to choose a winning bid or bidders by Wednesday, according to a timeline approved by the U.S. Bankruptcy Court for the Southern District of New York. Other parties have eight days to challenge the outcome in court before the decision goes to a bankruptcy judge at a hearing expected to take place in the coming weeks.

ESL said late last month that it was prepared to pay $4.4 billion for many of the retailer's remaining assets, including about 425 Sears and Kmart stores, an offer the hedge fund said would preserve up to 50,000 jobs.

At Tuesday's hearing, an attorney representing a committee of Sears' creditors expressed concerns about the rescue bid and said creditors believe there are "significant viable claims against ESL."

ESL has offered $35 million in exchange for a release from any liability related to transactions between the hedge fund and the retailer prior to Sears' bankruptcy filing.

In November, the creditors committee raised questions about financial dealings between Lampert, ESL and Sears, saying those transactions "may be part of an extended pattern of conduct that served to benefit certain (insider) equity holders," according to court filings. Lampert served as CEO of Sears until the bankruptcy filing.

Also at issue is whether ESL will be able to finance a portion of its bid by trading $1.3 billion in Sears debt it holds for ownership in the reorganized company. That question will be settled at the auction.

Sponsored Video Stories from LifeZette

The creditors committee has questioned whether a sale that would keep Sears in business can succeed and argued a liquidation would recover more of the money the company owes, according to court filings.

But an earlier version of ESL's bid did win support from three of Sears' vendors, Mien Co., Helen Andrews and Strong Process Garment Factory Co., who said in court filing that they think it is their best shot of being repaid.

Sears has not said how many other offers it received or whether any others would let the retailer remain in business.

While the changes strengthen ESL's offer, they may not win over skeptical creditors, said Sandeep Dahiya, associate professor at Georgetown University's McDonough School of Business. Sears has been struggling to get shoppers in stores for a long time, and it's not clear how a restructuring would fix that, he said. With its large real estate holdings, creditors may see it as "more valuable dead than alive," Dahiya said.

The $5 billion rescue bid would have been more compelling if it hadn't come from ESL, Dahiya added.

While Lampert was CEO, he and his hedge fund threw Sears several lifelines as the company continued losing money, closing stores and laying off workers.

"(Creditors) may simply feel, 'We've seen this movie before, and we don't think anything different will happen,' " he said.

(c)2019 Chicago Tribune

Visit the Chicago Tribune at www.chicagotribune.com

Distributed by Tribune Content Agency, LLC.

Loading...

Comments

blog comments powered by Disqus