U.S. retailer Sears files for bankruptcy

Ivan Schwartz
October 15, 2018

By the time Sears limped into bankruptcy on Monday, the once-great company was shriveled and sickly.

As part of the bankruptcy, the 125-year-old company, which was once the nation's largest retailer, will close 142 stores near the end of the year, with liquidation sales to begin soon. Sears opened its first store in 1925 in Chicago, and the Sears Tower in that city, now known as the Willis Tower, was the world's tallest building when it opened in 1973.

Coinciding with the filing, Edward Lampert, who engineered Kmart's $11 billion acquisition of Sears, is stepping down as CEO.

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 USA department store operator was close to securing on Sunday (Oct 14) to fund operations during bankruptcy proceedings, people familiar with the matter said.

Struggling retailer Sears, which has a store at the Natick Mall, has filed for bankruptcy.

Watch Sears trade in real time here. The company has roughly $5.6 billion in outstanding debt and has dwindled down to about 820 Sears and Kmart stores, down from 2,000 five years ago.

Shortly after the bankruptcy filing was made, the company said it has arranged $300 million in debtor-in-possession financing, which will allow it to continue operating the business and paying employees while it tries to restructure around a smaller group of stores. Negotiations over the fate of the fallen company have been continuing this week, as it faces a critical $134 million of debt that is maturing on October 15. Sears also said it is negotiating an additional $300 million in financing with ESL Investments, the company's largest shareholder and run by Lampert.

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Sears, the Amazon of its day, files for bankruptcy
And reports are swirling that the company is talking to advisers and banks in preparation for a bankruptcy filing. The company also has $269 million available to it from lenders, according to figures it released on September 13.

But ultimately, it was not possible to achieve a successful restructuring outside a Chapter 11 bankruptcy process, ESL said.

Shares in Illinois-based Sears closed at about 41 cents on Friday, down from over $100 in the years after hedge-fund star Lampert, once hailed as another Warren Buffett, merged it with discount store Kmart in a $11-billion deal in 2005. In May, the company said it had identified 100 more unprofitable stores in the US and would close 72 of them in the near future.

Last year, Sears sold its famous Craftsman brand to Stanley Black & Decker Inc., following earlier moves to spin off pieces of its Sears Hometown and Outlet division and Lands' End.

Sears, which started as a mail order catalog in the 1880s, has been on a slow march toward extinction as it lagged far behind its peers and incurred massive losses over the years. Other stores will be conducting sales and closing by November 2018. But the onset of discounters like Walmart created challenges for Sears that have only grown.

Meanwhile, Sears workers are nervous about what kind of severance they'll receive if their stores close. But it seems to me Sears' errors went mostly in the other direction: Trying too hard to figure out what would be the next big thing, and thereby getting into businesses it wasn't especially good at.

There will be no immediate impact to merchandise pricing (stores are not now liquidating).

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