Struggling Sears finally files for bankruptcy
Sears Holdings Corp filed for Chapter 11 bankruptcy yesterday with a plan to close 142 more stores, throwing into doubt the future of the century-old retailer that once dominated US malls but has withered in the age of Internet shopping.
The Chapter 11 filing to reorganize debts of the parent of Sears, Roebuck and Co and Kmart Corp follows a decade of revenue declines, hundreds of store closures, and years of deals by billionaire Chief Executive Officer Eddie Lampert in an attempt to turn around the company he acquired in 2005 for US$11 billion.
Lampert had pledged to restore Sears to its glory days, but the company, which has close to 70,000 employees, has not turned a profit since 2011.
Lampert and his hedge fund ESL Investments Inc own just shy of 50 percent of Sears and are its biggest creditor, with about US$2.5 billion owed to him and ESL. He has so far not disclosed whether he has turned a profit or loss since he invested in Sears following years of complex financial engineering at the company.
The company listed US$6.9 billion in assets and US$11.3 billion in liabilities in documents filed in the US Bankruptcy Court in the Southern District of New York.
Cash crunch
Sears said its cash crunch had accelerated because concerned vendors required payment sooner.
Lampert’s executive role will be replaced by a three-person committee, although he will remain as chairman.
Sears shares were down 14 percent in pre-market trading yesterday at 35 cents, valuing the company at just US$35 million.
To fund its operations in the coming months, Sears said it has received a US$300-million financing package from its existing lenders and was negotiating an additional US$300 million in bankruptcy financing from Lampert’s ESL. The bankruptcy court must greenlight this financing.
Sears said it will sell assets and begin closing 142 unprofitable stores by year-end with the aim of reorganizing around a smaller platform of around 700 of its best stores.
Sears dates back to the late 1880s. Its mail-order catalogues with merchandise from toys, medicine and gramophones to automobiles, kit houses and tombstones made it the Amazon.com Inc of its time.
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