(Reuters) – Sears Holdings Corp. SHLDQ.PK ) is in discussions with chairman Eddie Lampert and lenders on an agreement to expand a bankruptcy financing package that will help avoid liquidation, people who are known with the case said.
PHOTO PHOTO: A store-hanging sale mark is listed next to a Sears logo in New York, USA, October 1
Negotiations are on a critical time for Sears as it needs enough money to keep the shelves stored during the holiday, and keep enough support from creditors and suppliers to get out of bankruptcy.
Sears filed for Chapter 11 bankrupted October 15 with a plan to close about 142 of its 700 stores by the end of the year, doubting the future of the 125-year-old dealer once dominated American shopping malls, but has faded in a age of internet shopping.
Lampert Hedge Fund, ESL Investments Inc., co-operates with other potential lenders to contribute up to $ 450 million in bankruptcy instead of key security, which Sears currently has, which includes some retail lease agreements, said the sources.
In return to meet their security requirements, banks would have the opportunity to reduce exposure to Sears by contributing $ 150 million to bankruptcy funding, instead of the $ 300 million initially promised.
Maneuvers would have the combined effect of increasing today's total bankruptcy financing package from $ 300 million to up to $ 600 million.
The negotiations remain floating and the contours of the agreement, including how much money lenders would be able to change could be changed, said the sources. The sources refused to be identified because the negotiations are confidential.
A sears spokesman refused to comment.
Sears has had trouble obtaining additional funding beyond which banks were originally promised. This is because ESL and other possible new lenders struck giving as much as $ 300 million that would be second in line for repayment and lacked the required collateral to repay the loan, said the sources.
The revised loan under discussion aims at giving Sears, which employs approximately 68,000 people, more breathing space to avoid liquidation and reorganize around a smaller set of stores that are expected to be put up for sale.
Sears has held discussions with ESL to offer about 400 financially healthier stores that leaders believe could keep the dealer alive, according to court records. One of the sources said that ESL now weighs as many as 500 stores. ESL would be a so-called stalking horse bidder in this scenario, and submitted a first bid that others could try to top, according to the trial.
The sources said that Sears expires many options related to bankruptcy financing.
A consultation to complete Sears's bankruptcy financing is scheduled for November 15, according to a court order. A deadline for Sears to get a bidder for their stores is currently set to December 15 according to court record.
Reporting by Mike Spector and Jessica DiNapoli in New York; Editing Clive McKeef