Lampert makes US$4.6B bid for Sears
NEW YORK • Eddie Lampert has offered to buy Sears Holdings Corp. out of bankruptcy in a bid to salvage the failing retail empire he has controlled for more than a decade.
The chairman of Sears, whose ESL Investments ranks as the biggest shareholder and creditor, outlined a US$4.6-billion preliminary bid in documents released Thursday that could include a mix of cash, equity new loans and debt swaps. Lampert would take over the whole company, rather than just buying selected stores as originally planned, and preserve about 50,000 jobs, according to the documents.
The new bid is designed to head off outright liquidation of Sears, which has struggled to get support from lenders and suppliers.
“It’s a last-ditch effort,” said Farla Efros of HRC Retail Advisory. “They want to be able to hold on to any equity that they can actually hold on to, and it’s really about ego and saving face.”
The deal will hand Lampert more money and professional fees while the equity holders and lenders will see their investment evaporate, said Burt Flickinger at Strategic Resource Group, a retail-advisory firm.
“The longer Lampert stays, the more Sears and Kmart’s combined viability is impaired,” Flickinger said. “He’s trying to perpetuate himself almost as an undertaker to drain more blood out of the body and make more money as he’s doing it.”
The bid would be funded with about US$950 million from a new loan in addition to other debt, with some parts still being negotiated. Lampert, who holds about US$2.6-billion of Sears borrowings, would convert much of that stake into equity of the reorganized business. He’s also counting on the rollover of about US$271 million in cash collateral that supports an existing letter of credit facility, and he’s promising to assume US$1.1-billion of liabilities from gift cards and rewards programs.
The offer is contingent on ESL being released from liability related to any of its pre-bankruptcy transactions, according to the filing. The committee of unsecured creditors in the bankruptcy case has an ongoing investigation into “the possibility that ESL and other insiders may have exercised undue influence to siphon value away from the company on favourable terms,” a court filing states.