Sears Planning Bankruptcy Filing, Reports Say

Sears Holdings, which owns both the 125-year-old department store, as well as once-popular discounter Kmart, may file for Chapter 11 in the next few days, according to reports in The Wall Street Journal and CNBC.

The Journal report, which cited unnamed sources, said that the company “has hired M-III Partners LLC to prepare a bankruptcy filing that could come as soon as this week.” CNBC’s piece added that executives have “recently contacted banks to arrange the financing necessary to file for bankruptcy.”

In addition, on Tuesday, the company appointed Alan Carr, CEO of restructuring company DriveTrain, as an independent board director.

The reports did caution that bankruptcy may not be a done deal. Sears “continue[s] to discuss other options and could still avert an in-court restructuring,” said the Journal. CNBC similarly noted that a Chapter 11 filing “could be averted. Sears’ CEO, Eddie Lampert, has kept the company afloat through financial maneuvering and pouring his own money into the company. He may again choose to do so.”

Sears could not be reached for comment.

A recent proposal from Lampert’s hedge fund ESL Investments acknowledged that Sears “faces significant near-term liquidity constraints,” including a $134 million debt payment due Monday, Oct. 15.

“Sears’ transformation has taken longer than expected,” it said, “due to a variety of factors, including challenges facing the retail industry.”

Lampert, who took over Sears in 2007, has engaged in a wide range of maneuvers to save the sinking department store. It closed over 100 stores in the first half of the year and plans to close 46 more in the fourth quarter. It still has a fleet of 866 Sears and Kmarts. it is also planning to sell one of its signature brands, Kenmore.

But through all this, the company has continued to lose money—as well as customers. It posted a $508 million loss for the second quarter of 2018 (ended Aug. 4). Comps declined 3.7 percent for the period, though jewelry was one of the few categories that saw comp gains. Sears Holdings’ last profitable year was 2010.

At press time, its stock was trading at 41 cents.

Top image courtesy of Sears Holdings

 

JCK News Director