USA TODAY International Edition
Controversial Lampert may be Sears’ last hope
Bankruptcy filing results in hurdles he must clear
He’s either a vulture picking Sears apart, or he’s the company’s last hope. Depending on your perspective, Eddie Lampert is chiefly to blame for systematically dismantling the iconic American retailer or deserves credit for keeping the company alive far longer than most believed was possible. Either way, Lampert, who engineered the company’s 2005 combination with Kmart and became CEO in 2013, might be all that stands between Sears and liquidation. Sears Holdings filed for Chapter 11 bankruptcy protection early Monday in a last-ditch attempt to avoid entombment in the vast graveyard of retailers slain by digital disruption and their own miscues. The company plans to close about 188 of its remaining 687 stores as it seeks stability following years of sales declines, store closures and cost cuts. With the Chapter 11 filing, Sears added 142 more stores to its previously announced list of 46 planned closures in November. While Lampert stepped down as CEO in tandem with the bankruptcy filing, he remains chairman and the company’s largest investor, through his hedge fund, ESL Investments. He is negotiating a deal to serve as lead bidder on a “purchase of a large portion of the Company’s store base,” according to a Sears court filing. If that deal gets done, it could keep Sears alive in some form for years to come, establishing Lampert as the company’s principal landlord and helping him maintain control of its destiny. But for Lampert to get a deal done, he’ll need to clear several hurdles that weren’t there before bankruptcy, including a federal bankruptcy judge, the company’s creditors and, potentially, the U.S. Justice Department. Among his biggest challenges: convincing the court that a series of debt deals and asset sales he executed in recent years were in the company’s best interests. Melissa Jacoby, a bankruptcy law professor at the University of North Carolina Chapel Hill, said the Chapter 11 case may call attention to the propriety of Lampert’s dealings. USA TODAY reported in June that Lampert, the largest investor in Sears, was being paid $200 million to $225 million in annual loan payments by the company. He also ensured that most of the debt he extended to the company was secured by key assets, meaning he may take possession of those assets in bankruptcy if the company can’t pay him in full. A representative for Lampert’s hedge fund, ESL Investments, declined a request for an interview with Lampert. A Sears spokesman did not respond to an interview request. “We intend to work closely and collaboratively with other stakeholders to restructure the company’s balance sheet using the Chapter 11 framework as quickly and efficiently as possible and will continue to press forward with the goal of seeing Sears emerge from this process positioned for success as a smaller, less indebted retailer in an integrated retail environment,” Lampert said in a statement issued in his capacity as ESL hedge fund manager. The fate of Sears and its 68,000 employees may be tied to Lampert’s willingness to open his pocketbook again. He had lent Sears more than $2.4 billion as of June, according to Debtwire, which provides news and analysis of corporate and municipal debt. But other creditors, including banks that provided bankruptcy financing to keep the company afloat in the short term, might not sign on to his plan.