Sears’ fate hinges on Monday’s bankruptcy auction
In its 126-year history, Sears grew to become the country’s biggest retailer and outlasted Chicago competitors like Carson Pirie Scott, Montgomery Ward and Wieboldt’s. Its future now hinges on a bankruptcy auction scheduled to start Monday.
Edward Lampert, chairman and former CEO of Hoffman Estates-based Sears Holdings Corp., is trying to buy the retailer with a plan to keep it in business and keep up to 50,000 workers employed. Lampert’s hedge fund, ESL Investments, sweetened its offer for Sears this week, bringing the total value of its proposal to more than $5 billion.
But some of Sears’ creditors are skeptical of ESL, and it’s not yet known how the hedge fund’s proposal stacks up against other offers for the company’s assets.
If Lampert’s plan fails, Sears could face liquidation.
Here’s what you need to know ahead of the bankruptcy auction on Monday.
Q: Sears used to be the country’s biggest retailer. What happened?
A: Online shopping is part of the story, but Sears’ challenges go back decades. It was slow to react to new competition from discount chains and specialty stores and to changes in shopping habits, including a shift away from suburban shopping malls.
As time went on, Sears kept shrinking – closing hundreds of stores and getting rid of more than 60 percent of its employees in less than three years. But it also continued losing money, racking up more than $11 billion in losses since 2011. Q: The company planned to reorganize in bankruptcy. Why is it now at risk of shutting down?
A: The concerns creditors have about ESL’s bid have to deal, in part, with financial dealings between Lampert, ESL and Sears. The creditors say those transactions “may be part of an extended pattern of conduct that served to benefit certain (insider) equity holders,” according to court filings. ESL denied those allegations.
Q: What are the potential outcomes?
A: Lampert’s ESL has said it will strive to keep Sears in business if it wins the bid. But even if the company liquidates, the Sears Home Services business or brands like Kenmore and DieHard could live on. It’s also possible that someone could buy Sears’ intellectual property and try to bring the brand back online or in bricksand-mortar stores.
Shoppers walk outside the Sears store at Woodfield Mall in Schaumburg, Ill., on Black Friday, Nov. 23. Sears Chairman Edward Lampert has raised his bid to buy the bankrupt retailer’s assets with a proposal that could top $5 billion.