With Sears filing for bankruptcy and so many stores closing, the end may be drawing near for the iconic American retailer. Many of us aren’t ready.
Sears is teetering on the edge of liquidation.
Barring a last-minute bid to save the company in shrunken form, one of the most iconic American retailers is at serious risk of fizzling out within weeks.
Sears Holdings, the parent company of the Sears and Kmart chains, missed a key deadline Friday to report whether it would give further consideration to an offer by its chairman and largest investor to acquire a sizable chunk of the company and keep it operating.
Without a deal, a swift pivot toward liquidation is a serious possibility, if not altogether likely.
Former Sears CEO Eddie Lampert’s proposal — made through his hedge fund ESL Investments — included a complex mix of new financing, previous ESL loans and the assumption of certain liabilities. ESL said the deal was worth $4.4 billion.
The deal would keep about 50,000 employees working and about 425 stores open, at least for the foreseeable future. Sears had more than 3,000 stores earlier this century but has closed thousands in recent years.
Sears advisers have cast doubt on the viability of the Lampert offer, according to CNBC and Bloomberg. The company had set a deadline of 4 p.m. Friday to say whether it would consider the deal in a bankruptcy auction set for Jan. 14. But that deadline came and went with no word on the Lampert offer.
Sears and ESL declined to comment Monday.
A federal judge has scheduled a hearing for 10 a.m. Tuesday to hear updates on the case, at which point the company’s future could be revealed.
One sticking point of the Lampert offer was that ESL wants to be released from any potential liability tied to past deals it orchestrated with Sears. Those deals include billions in debt and a 2015 transaction to spin off some of the retailer’s most valuable real estate into a separate venture of which ESL is a major shareholder.
A committee of unsecured creditors in the Sears bankruptcy has called on a federal judge to examine those deals. ESL has said it structured all deals appropriately and that it ultimately helped preserve jobs.
“Sears once was a history-making company for the ways in which it sold its products and the audiences it reached,” said Melissa Jacoby, bankruptcy law professor at University of North Carolina Chapel Hill, in an email. “In recent years, it has become more notable for financial engineering that may have enriched certain investors but left the company even more vulnerable to failure and the loss of tens of thousands of jobs. Those steps delayed bankruptcy but also made reorganization less viable.”
Sears has closed hundreds of stores in recent months, including after filing for Chapter 11 bankruptcy protection in October. It announced a new round of closures late last month.
The bankruptcy came after Sears failed to adapt to digital competition, struggled to keep pace with nimble physical competitors, did not reinvest in its stores and crumbled under the weight of pension costs.
Critics say Lampert saddled the company with his own hedge fund loans instead of designing a true turnaround plan while serving as CEO. But Lampert has said he was “fighting like hell” to keep the company alive and believed his plan would accomplish a transformation.
He resigned as CEO when the company filed for bankruptcy but retained the chairmanship. At the time of the filing, he owned nearly half the company.
The company has said it’s evaluating Lampert’s offer through an independent board committee.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
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