Sears hires advisers for bankruptcy filing ahead of debt payment

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.

Sears faces US$134 million of debt maturing on October 15, and Lampert's ESL Investments said in a filing last month that the borrowings coming due were among those creating "significant near-term liquidity constraints" for the company.

Sears Holdings is getting things in order for a bankruptcy filing that could come sometime this week.

However, Lampert wants to restructure the debt without filing for bankruptcy protection, because he views bankruptcy as risky for retailers, the Journal said. Lampert and ESL are the company's two largest shareholders.

Shares of real estate investment trusts (REIT) exposed to Sears properties also fell Wednesday.

On Tuesday, Sears announced that it had hired restructuring expert Alan Carr as an independent director. The company is also talking to lenders about providing it with debtor-in-possession financing, CNBC reported. Even after several rounds of store closures across the country in recent years, the holding company still operates around 500 Sears stores and 360 Kmart stores.

Shares of Sears tumbled 18 cents, or 31 percent, to 40 cents in trading before the market opened.

But the retail landscape is littered with out-of-business brands that tried to reorganize in the bankruptcy process and liquidated their businesses instead.

The Wall Street Journal quoted sources saying Lampert wants to restructure and is anxious that a bankruptcy filing will lead to a liquidation, which has happened with so many retailers, the most recent being Toys R Us.

The 125-year-old retailer has been hit particularly hard as brick-and-mortar stores have struggled to maintain massive showrooms and compete with e-commerce giants.

Sears and Kmart merged to form Sears Holdings in 2005 when they had 3,500 U.S. stores between them.

In July, Sears closed its last store in Chicago, once its hometown. The same day, the company revealed that a major shareholder had dumped 142,000 shares this week for only 59 cents to 65 cents a share.

If Sears were to file for bankruptcy, its financial performance during the upcoming holiday season could prove crucial in determining its future, according to the sources. It has lost $11.7 billion since 2010, its last profitable year.



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