Sears files for Chapter 11; Lampert resigns as CEO
Sears Holding Corp. filed for Chapter 11 bankruptcy protection early Monday morning, hours before a $134 million debt payment came due.
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. (This is in addition to the previously announced closure of 46 unprofitable stores by November 2018.) Sears, which has shuttered thousands of locations during the past several years, currently operates a total of about 700 Sears and Kmart stores.
Also, Eddie Lampert, Sears’ chairman, CEO and its biggest shareholder, is stepping down as CEO, effective immediately. He remains chairman. The company has appointed restructuring expert Mohsin Meghji, managing partner of M-III Partners, as its chief restructuring officer.
Lampert, who purchased Sears, Roebuck & Co. and brought it together with Kmart in an $11 billion deal in 2005, is Sears’ biggest creditor through his hedge fund ESL Investments. He has been helping to keep the company afloat for years, primarily with billions of dollars of short-term loans. And he still is. Sears said ESL is negotiating a $300 million debtor-in-possession loan to support it through bankruptcy. (Sears has also secured commitments for $300 million in senior priming debtor-in-possession financing from its senior secured asset-based revolving lenders.)
In addition, ESL is also exploring a stalking-horse bid to buy “a large portion” of the company’s stores in the bankruptcy process.
“Over the last several years, we have worked hard to transform our business and unlock the value of our assets,” said Lampert. “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 Chapter 11 process will give Holdings the flexibility to strengthen its balance sheet, enabling the company to accelerate its strategic transformation, continue right sizing its operating model, and return to profitability.”
Sears said it has created an “office of the CEO,” which will be responsible for managing the company’s day-to-day operations during the bankruptcy restructuring process. It will be composed of Robert A. Riecker, CFO; Leena Munjal, chief digital officer, customer experience and integrated retail; and Gregory Ladley, president of apparel and footwear.
Sears said it intends to continue payment of employee wages and benefits, honor member programs, and pay vendors and suppliers in the ordinary course for all goods and services provided on or after the filing date. Sears and Kmart stores, and its online and mobile platforms, are open and continue to offer a full range of products and services to customers.
“As we look toward the holiday season, Sears and Kmart stores remain open for business and our dedicated associates look forward to serving our members and customers,” Lampert stated. “We thank our vendors for their continuing support through the upcoming season and beyond.”
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