Sears goes bankrupt, mired in debt and deserted by shoppers
Sears goes bankrupt, mired in debt and deserted by shoppers
Sears, once the largest retailer in the world, is closing hundreds of stores and reportedly planning to file for bankruptcy. Here's how it got there.
15 October, 2018, 15:27
Sears Holdings Corp CEO Eddie Lampert has stepped in to contribute towards a financing package of between US$500 million and US$600 million that the United States department store operator was close to securing on Sunday (Oct 14) to fund operations during bankruptcy proceedings, people familiar with the matter said. While Sears and Kmart stores and the online business will remain open, the company will shut 142 unprofitable outlets near the end of the year, on top of 46 unprofitable stores already slated for closure by November. The company has more than 700 stores across the country, including at the Chautauqua Mall in Lakewood.
More than 100,000 retired Sears employees are believed to hold pensions, which bankruptcy should protect.
The company already has commitments for US$300 million of debtor-in-possession financing from its senior secured asset-based revolving lenders, according to the statement, and it's negotiating a US$300 million subordinated DIP financing with Lampert's hedge fund, ESL Investments Inc.
A store closing sale sign is posted next to a Sears logo in New Hyde Park, New York, U.S., October 10, 2018.
The company has suffered, along with many other traditional retailers, from rising online competition from firms such as Amazon.
Under the bankruptcy plan, Lampert's executive role will be replaced by a three-person committee, though he will remain as chairman of the board.
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While we have made progress, the plan has yet to deliver the results we have desired, and addressing the company's immediate liquidity needs has impacted our efforts to become a profitable and more competitive retailer.
The Company's Board has created an Office of the CEO, which will be responsible for managing the Company's day-to-day operations during this process.
Over the coming months, the company expects to market and sell certain company assets.
But the retail landscape is littered with brands that tried to reorganize in the bankruptcy process and liquidated their businesses instead, such as RadioShack, Toys "R" Us and Sports Authority.
Sears has hired M-III Partners, a boutique advisory firm specializing in seeing companies through bankruptcies and restructuring, according to the Wall Street Journal.
Lampert, the largest shareholder, has been loaning out his own money for years and has put together deals to prop up the company, which in turn has benefited his own ESL hedge fund. Sears merged with Kmart in 2005.
The Sears catalogUE eventually sold products ranging from hardware and automobiles to kits for building an entire house. He recently proposed selling off another $3.25 billion in real estate and assets, including Sears Home Services and the flagship Kenmore brand. Lampert personally owns 31 percent of the companys shares. The company has said it's the nation's largest provider of home services, with more than 11 million service calls a year.
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