Parent company of Sears, Kmart prepares for possible liquidation

End may be near for iconic retailers Sears Kmart

In his original bid healso offered to forgive the more than $1 billion in debt he is owed by Sears from earlier loans he made to the company.

The court hearing that was set for Tuesday morning was delayed until the afternoon, a development that Reuters called "sign that Sears and Lampert were continuing to negotiate".

In making his bid for what remains of Sears, former CEO and billionaire investor Lampert stipulated any deal would put him and ESL ahead of other creditors down the line, and would be financed with more debt than cash. According to lawyers close to the matter, one of the main sticking points was that the $4.4 billion bid, which included $1.3 billion in financing from three financial institutions, didn't include cash.

Sears on Tuesday had planned to tell the bankruptcy court it had rejected Lampert's $4.4 billion offer to buy the retailer, after it fell short of covering its bankruptcy expenses.

U.S. Bankruptcy Court Judge Robert Drain on Tuesday said other parties can submit additional or improved bids before the Monday auction and that Sears will be obligated to consider all its options.

Sears' bankruptcy attorney said on Tuesday the retailer will move forward with its planned auction, set for January 14, averting liquidation plans that were supposed to be announced earlier in the day.

Lampert's bid said he plans to offer jobs to 50,000 Sears and Kmart employees.

It's not the first frenzied deal Sears has made during its bankruptcy. If Sears doesn't accept Lampert's bid, it's likely the retailer will face liquidation and begin the shutting down process very soon. It also sought a release from any liability related to transactions between the hedge fund and the retailer prior to Sears' bankruptcy filing.

The costs, which include bills from lawyers and financial advisers, are expected to exceed US$200 million, those sources said. Without an agreement, Sears faced the possibility of liquidation.

"I remember at the beginning of summer, we'd start flipping through the catalog, having to get the penny loafers of the Mary Janes, the black and white shoes", she said.

An attorney representing businesses and people who are owed money by Sears told the court Tuesday they will still challenge the bid if it turns out that Lampert intends to use forgiveness of any of the debt as part of the offer.

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