A Sears Bankruptcy Could Be a Win for Some Landlords

11 October, 2018, 06:47 | Author: Mary Valdez
  • Sears store in Garden City NY. REUTERS  Shannon StapletonMore

Sears is facing a debt repayment of $134 million on Monday, although one option would be for its CEO, the billionaire investor Edward Lampert, to make the payment and rescue the company from bankruptcy, the Journal noted.

"The journey to running a member-centric company on a consistently profitable basis has taken far longer than we expected", Lampert wrote in a lengthy blog post. Spokespeople for Lampert and Sears declined to comment.

ESL Investments, the hedge fund managed by Sears CEO Eddie Lampert, said in a filing last month that the debt coming due was among the obligations creating "significant near-term liquidity constraints" for the company. 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 yet that such a move may not be far off.

In August, the board said it was weighing an offer from Lampert that Sears should sell its Kenmore brand and said ESL might offer to buy it if it was willing to sell.

Sears, which was the world's largest retailer in the 1960s, has been struggling in recent decades, in the face of declining foot traffic at its brick-and-mortar stores as online shopping gains popularity. Sears now has 529 stores.

Sears shares were down more than 36 percent in midday trading Wednesday.

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Lampert has invested and lent to Sears many times over the years, making him and his hedge fund the company's largest shareholders with a stake just shy of 50 percent, as well as its biggest creditor, with about $2.5 billion owed to him or funds he controls.

The handwriting is on the wall: Sears appears to be nearing bankruptcy. The other half is leased, and there would be little cost savings from rent restructurings of those stores since Sears already pays well below market rents. When Toys "R" Us, the largest specialty toy retailer, filed for bankruptcy protection last September, it sought to emerge from it after restructuring its debt and shutting stores.

Sears hopes Carr can be the salesman it needs to win over creditors.

Larry Perkins, founder and chief executive of SierraConstellation Partners, a firm that advises companies going through bankruptcies and other transitions, said that Sears bringing in bankruptcy advisers "is not a sure sign by any means, but it's certainly a leading indicator".

"This has been the slowest moving train wreck happening for literally years", Perkins added.

"It's sad, it's really sad to see the end of an era", Perkins said.

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