US retail titan Sears files for Chapter 11 bankruptcy
The company 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.
NEW YORK: Sears Holdings filed for Chapter 11 bankruptcy on Monday with a plan to close 142 more stores, throwing into doubt the future of the century-old retailer that once dominated US malls but has withered in the age of internet shopping.
The Chapter 11 filing to reorganise debts of 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 Chief Executive Officer Eddie Lampert in an attempt to turn around the company he bought in 2004.
Lampert 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.
But the company has not turned a profit since 2011, and critics say Lampert let the stores deteriorate over the years, even as he bought the company’s stock and lent it money. It has sold off the legendary Craftsman brand and is considering an offer from Lampert for the Kenmore appliance name.
The company 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.
The bankruptcy filing was sparked by a standoff between Lampert, the company’s biggest shareholder and lender, and a special board committee, over a rescue plan proposed by Lampert.
Bankruptcy plan
Under the bankruptcy plan, Lampert’s executive role will be replaced by a three-person committee, though he will remain as chairman of the board. Mohsin Meghji, a managing director of the M-III Partners corporate advisory firm, was appointed chief restructuring officer.
Shareholders generally lose their investment when a company files for bankruptcy, and the fate of Sears itself will depend on the willingness of creditors and suppliers to keep the company afloat.
The largest US toy retailer, Toys ‘R’ Us, tried to emerge from its 2017 bankruptcy filing but was forced to liquidate six months later after creditors lost confidence in its turnaround plan. Store closures, asset sales
Sears said it will sell assets and begin closing 142 unprofitable stores by year-end with the aim of reorganizing around a smaller platform of around 700 of its best stores. It is also weighing the sale of “a large portion” of its stores and said they could be bought by Lampert’s hedge fund in a bankruptcy auction.
Meanwhile, Sears and Kmart stores are open for business. The company said it is continuing to pay employees’ wages and benefits and is working with its vendors to ensure its shelves remain stocked. “The company believes that a successful reorganization will save the company and the jobs of tens of thousands of store associates,” Sears said in a statement.
The retailer employed about 89,000 workers in the United States as of February, compared with 246,000 people five years ago.
Sears said it has received a $300 million financing package to fund its operations during the bankruptcy proceedings and was negotiating an additional $300 million.
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