Sears could finally be nearing bankruptcy after years of decline

Ivan Schwartz
October 11, 2018

Sears shares were down 31 per cent at 40.5 cents in afternoon trading in NY, giving the company a market capitalization of $40 million.

Sears Holdings shares lost almost a third of their value in early trading on Wednesday after a report said that the beleaguered retailer had hired advisers to prepare for a bankruptcy filing ahead of a debt payment deadline.

"The problem in Sears case is that it is a poor retailer", said Neil Saunders, Managing Director of GlobalData Retail, in a Tuesday research note, where he wrote that he wasn't surprised the retailer was preparing for a possible bankruptcy filing.

Sears has instructed M-III Partners, a boutique advisory firm, to draw up a bankruptcy filing and has asked financial advisers to prepare a loan that would keep it afloat should it enter bankruptcy.

The world's largest retailer in the 1960s, Sears sold everything from toys to auto parts to mail-order homes and was a key tenant in nearly every big mall across the United States.

"I don't think it is an immediate drive to bankruptcy, but clearly the options are limited", said David Tawil, president and co-founder of Maglan Capital, which follows distressed companies.

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Sears' and Kmart's chairman, chief executive, largest shareholder and biggest creditor - reportedly is looking for a larger restructuring than just anteing up more cash to bail out the cash-strapped retailers. Meanwhile, it has shuttered hundreds of money-losing stores, and it promised to close an additional 150 this year. But if Sears is now in touch with banks to secure the financing needed for a bankruptcy filing, as CNBC reported Wednesday morning, that could send the surest signal that such a move may not be far off.

Lampert has been willing to pour additional cash into the company in return for debt backed by real estate or other hard assets. The company has a total of about $5.6 billion in outstanding debt and is down to about 820 Sears and Kmart stores.

The Sears special committee had been weighing a prior offer from Lampert to acquire the retailer's Kenmore appliances brand and its home services business for as much as $480 million.

Lampert himself has had a controversial tenure as chief executive.

It looks like Eddie Lampert will not be coming in to rescue Sears.

In the September SEC filing, Lampert's hedge fund said it "must act immediately to have sufficient runway to continue its transformation" if Sears could ever pull off a turnaround.

Other reports by GizPress

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