Sears is preparing for possible liquidation when ESL bids fail
(Bloomberg) – Sears Holdings Corp. Preparing to Potentially Wipe Down the Iconic Dealer After President Eddie agreed to buy hundreds of stores out of bankruptcy, lacking bank qualifications, according to people with knowledge of the case.
The dealer began laying the groundwork for a liquidation after a series of meetings Friday where its advisers weighed the benefits of a $ 4.4 billion offer from Lampert's hedge fund to buy Sears as a business, the people said. who requested not to be identified because the discussions are private.
While Lampert ESL Investments has not convinced bankers about the viability of the bid, it can still make last-minute improvements before a status hearing on Tuesday. Lampert has also outlined a back-up plan where ESL will pursue the purchase of some of Sears' parts, including real estate and intellectual property, such as its brand.
Spokesmen for Sears and ESL refused to comment, as a representative of Lazard, who advised Sears.
Deficiencies
The dealer, which includes the name department stores and the Kmart chain, entered chapter 11 protection in October with the hope that it could get out of bankruptcy with less debt and a smaller group of more profitable stores. Bid Lampert filed at the end of December, which was supposed to keep 425 stores open, while maintaining up to 50,000 jobs.
But as representatives of the company – along with creditors and other parties – met in New York on Friday to assess the benefits of the bid, they found a number of shortcomings, people with knowledge of the discussions said.
Gaps remained in some of the funding of the proposal, and the plan would not have provided enough money to cover the cost of the bankruptcy, the people said; There were also undervalued holdings and other assets over what liquidators promised to pay.
Another key point: much of the humble bid rested on his ownership of the reorganized business as opposed to the forgiveness of $ 1.3 billion of debt he has. But the validity of these very claims – racked up in a number of spinoffs, refinancing, and other transactions – has already been challenged by a group of creditors. The ESL plan did not include a cash backstop for that part of the bid.
ESL has said its rights are valid and came after the company expanded more than $ 2.4 billion in secured funding to keep Sears afloat.
Lampert's bid Including a secondary suggestion was the offer to go through. It included buying selected property for $ 1.8 billion and Sears' intangible assets, such as the brand name. Much of that plan will also be funded by forgiving some of the debt he holds.
– With help from Nabila Ahmed.
To contact journalists on this story: Eliza Ronalds-Hannon in New York on eronaldshann @ bloomberg .net; Lauren Coleman-Lochner in New York at llochner@bloomberg.net
To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Shannon D. Harrington, Stanley James
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