Sears rejects bailout bid, hundreds of stores likely to close

Jeannie Matthews
January 9, 2019

The reprieve came after what Sears lawyers described to a bankruptcy judge in NY as "round-the-clock" negotiations following the company board's initial rejection of Eddie Lampert's proposal, which sought to preserve 425 stores and 50,000 workers.

Sears' bankruptcy, which includes discount chain Kmart, followed a decade of revenue declines, hundreds of store closures, and years of deals by billionaire Lampert in an attempt to turn around the company he put together in 2005 through an $11 billion deal.

Lawyers for Lampert and his hedge fund, ESL Investments, were pressing for more time to sweeten his offer.

Sears Holdings filed for bankruptcy protection last October. Sears filed for bankruptcy in October. Under the plan the remaining Sears and Kmart stores would close, meaning about 68,000 employees would lose their jobs.

But it wasn't immediately clear just how much additional cash Lampert will pay for the assets.

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While current Sears shareholders have lost almost all their investment and creditors that include the US government are owed $11 billion, Lampert has pocketed nearly $1.4 billion to date from his investment in the retailer, calculated Institutional Investor in a recent story. It is known he expects the new Sears to borrow $1.3 billion from three leading banks.

Many of Sears' major creditors have said they want the company to liquidate.

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.

Lampert and his hedge fund argue the loans were proper and made to keep Sears alive.

A recent Bloomberg report said Sears representatives summoned liquidation firms and other advisers to emergency meetings on Friday after it rejected the bid and that the retailer would now focus on preparing for liquidation sales to start as early as mid-January.

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