Sears Inks $60M Deal for Home Im­prove­ment Busi­ness

WWD Digital Daily - - News - BY VICKI M. YOUNG

The trans­ac­tion is sub­ject to bet­ter of­fers at an auc­tion.

While Sears Hold­ings Corp. con­tin­ues to ne­go­ti­ate a new sup­ple­men­tal fi­nanc­ing pack­age, it's hop­ing to garner some fi­nan­cial breath­ing room through the sale of its home im­prove­ment busi­ness to Ser­vice. com for $60 mil­lion.

Ac­cord­ing to court doc­u­ments filed with a fed­eral bank­ruptcy court in White Plains, N.Y., the re­tailer said its home im­prove­ment busi­ness has “over 2,000 ac­tive ser­vice pro­fes­sion­als and in­de­pen­dent ser­vice con­trac­tors,” who do work from floor­ing to kitchen re­mod­el­ing, ex­te­ri­ors work for en­try doors, sid­ing and roof­ing to HVAC sys­tems and wa­ter heater main­te­nance to re­pair ser­vices.

The so- called stalk­ing horse agree­ment with Ser­vice.com es­sen­tially serves as base­line pric­ing for the as­set, with the hope that bet­ter of­fers will be forth­com­ing. If Ser­vice.com is out­bid, it will re­ceive a break-up fee of 1.5 per­cent of the cash pur­chase price to be paid by the suc­cess­ful bid­der. Ser­vice. com has also agreed to re­main as the back-up bid­der if it gets out­bid, in case the win­ning bid­der can­not close on the trans­ac­tion. If no other bid­ders come for­ward, Ser­vice.com will be the ac­quirer, pend­ing bank­ruptcy court ap­proval.

Sears is seek­ing Nov. 15 as the hear­ing date for ap­proval of the stalk­ing horse bid. The re­tailer has set Dec. 11 as the dead­line for com­pet­ing bid­ders to sub­mit their bind­ing bids and ap­pro­pri­ate pa­per­work for pre-qual­i­fi­ca­tion. An auc­tion date of Dec. 13 is planned for the qual­i­fied bid­ders, to be held at 10 a.m. at the of­fices of Weil, Got­shal & Manges, bank­ruptcy coun­sel for Sears.

The Sears Home Im­prove­ment busi­ness is a sep­a­rate as­set from the Sears Home Ser­vices busi­ness.

Ac­cord­ing to the court fil­ing, ESL In­vest­ments Inc. also ex­pressed in­ter­est in ac­quir­ing the home im­prove­ment busi­ness, but the of­fer from Ser­vice.com was deemed the bet­ter one. While the bid­der and

Sears were ne­go­ti­at­ing a sales agree­ment, the re­tailer filed for bank­ruptcy court pro­tec­tion. ESL is man­aged by Ed­ward S. Lam­pert, who is also the chair­man of the hedge fund and chair­man of Sears Hold­ings.

Sep­a­rately, Sears on Nov. 1 filed a mo­tion seek­ing ap­proval of global bid­ding and sale pro­ce­dures for the sale of the bulk of the com­pany as a go­ing con­cern. The re­tailer also said that trans­ac­tion for the home im­prove­ment busi­ness would not ad­versely im­pact as­set sales un­der the global sale pro­ce­dures or the sale of the Sears Home Ser­vices busi­ness.

The re­tailer filed its vol­un­tary Chap­ter 11 pe­ti­tion for bank­ruptcy court ap­proval on Oct. 15. Since then, Lam­pert has been in talks with Sears and the com­pany's con­stituency groups over ad­di­tional fund­ing for a fi­nanc­ing fa­cil­ity.

The ini­tial talks were for Lam­pert's ESL to pro­vide up to $300 mil­lion in a ju­nior debtor-in-pos­ses­sion fi­nanc­ing fa­cil­ity. The re­tailer's ex­ist­ing lenders cur­rently hold the se­nior po­si­tion. Lam­pert has also been in talks with po­ten­tial in­vestors to part­ner with him and ESL in the DIP fi­nanc­ing, as well as dis­cus­sions re­gard­ing the struc­ture of the ad­di­tional fund­ing, such as col­lat­eral and who has pri­or­ity over cer­tain as­sets used as se­cu­rity for the loan.

The fed­eral bank­ruptcy court as part of the bank­ruptcy case's first-day or­ders has al­ready pro­vided in­terim ap­proval of the fi­nanc­ing pack­age with the se­nior lenders. Any change would re­quire fur­ther ap­proval from the bank­ruptcy court. A hear­ing on the fi­nanc­ing is slated for Nov. 15.

Sears filed its Chap­ter 11 pe­ti­tion for bank­ruptcy court ap­proval on Oct. 15.

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