Sears is hammering out deal to stay open in bankruptcy

Jermaine Castillo
October 15, 2018

Sears and its Kmart stores plan to stay in business with help from US$600 million in new loans, but a turnaround plan outlined in a separate statement envisions Sears closing and selling dozens of stores, with Eddie Lampert, the biggest shareholder, stepping down immediately as chief executive officer.

By last month, Sears' market value had fallen below $100 million, less than quarter of the value of Kenmore itself.

The question now is whether a smaller version of the company that once dominated the American retail landscape can remain viable or whether the iconic brand will be forced out of business.

In September, Lampert - Sears' largest shareholder and creditor and the owner of the hedge-fund ESL Investments - asked creditors to refinance $1.1 billion in debt before the October 15 payment, according to a filing with the Securities and Exchange Commission.

The company has struggled with outdated stores and complaints about customer service even for its once crown jewels: major appliances like washers and dryers.

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Sears lined up $1.875 billion in bankruptcy financing to extinguish its existing loans and keep the lights on at the chain through the holiday season.

There will be no immediate impact to merchandise pricing (stores are not now liquidating).

Whirlpool, which had started in business more than a century ago selling its appliances at Sears, pulled its various brands out of Sears and Kmart stores previous year.

Many Sears locations are within struggling shopping malls. Lampert will remain the company's chairman. In August, the company announced another 46 store closings.

She said a refrigerator her mother bought at Sears broke after two years and it still hasnt been fixed for nearly a month with no help from the retailer. It last made a profit in 2011 and losses now top $11bn.

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With a history that stretches back to 1886, the company was a pioneer of departmental stores that sold all things to all people and by the mid-twentieth century had built a vast empire that stretched across North America.

The company has a $134 million debt payment due today.

But many of Sears' problems were self-inflicted. It has lost $11.7 billion since 2010, its last profitable year. While losing the retail battle with Walmart, Home Depot and others, it was flanked on another side by Amazon's rapidly growing e-commerce business. Lampert bought Sears in 2004 and merged it with Kmart, in which he had a controlling stake, the next year. But plenty of others like, Toys R Us and Bon-Ton Stores Inc., haven't.

It's also worth noting that Sears and Montgomery Ward were both disruptors of marketplaces in their own times.

As of May, it had fewer than 900 stores, down from a 2012 peak of 4,000. Much of his focus has turned to Sears' online presence over upkeep on physical storefronts, many of which total thousands of square feet.

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