NEW YORK (Reuters) – A bankruptcy judge on Monday approved $300 million in financing to keep department store chain Sears Holdings Corp open through the holiday season, giving the century-old retailer that once dominated US shopping malls a chance to remain in business.
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Sears filed for Chapter 11 bankruptcy protection in White Plains, New York earlier on Monday with a plan to close about 142 of its 700 stores by year-end and sell its best-performing stores in an auction in January to a buyer that will keep them operational.
The bankruptcy filing by 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 Eddie Lampert in an attempt to turn around the company he acquired in 2005 for $11 billion.
Mr Lampert, who stepped down as Sears CEO on Monday but will remain chairman, had pledged to restore Sears to its glory days, when it owned the tallest building in the world and companies that included a radio station and Allstate insurance.
“For somebody of my generation, Sears Roebuck was a big deal… Sears has been dying for many years, it has been obviously improperly run for many years, and it’s a shame,” US President Donald Trump told reporters on Monday. US Treasury Secretary Steven Mnuchin was on Sears’ board of directors between 2005 and 2016.
Mr Lampert and his hedge fund ESL Investments Inc own just under of 50 percent of Sears’ shares and are its biggest creditor, with about $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.
Beyond the $300 million bankruptcy financing package from its existing lenders that Sears secured on Monday, the retailer said it was negotiating an additional $300 million in bankruptcy financing from Mr Lampert’s ESL.
Sears listed $6.9 billion in assets and $11.3 billion in liabilities in documents filed in the US Bankruptcy Court in the Southern District of New York. Its debt to Pension Benefit Guaranty Corp, a US government agency overseeing the retirement benefits of former Sears workers, was not disclosed in the bankruptcy filing.
Under the bankruptcy plan, Mr Lampert’s executive role will be replaced by a three-person committee. Mohsin Meghji, a managing director of the M-III Partners corporate advisory firm, was appointed chief restructuring officer.
Sears had earlier announced the separate closing of 46 unprofitable stores, and said Monday that is expected to be completed next month.
In bankruptcy court on Monday, Andy Dietderich, an attorney for Sears investor Bruce Berkowitz, formerly a member of the retailer’s board of directors, expressed concern that Mr Lampert would have too much control over the bankruptcy process.
“Most of the company is gone,” Dietderich said.