Fate of Sears hinges on bankruptcy auc­tion Mon­day

The Bradenton Herald - - Business - BY LAU­REN ZUMBACH

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 – the end of the road for an iconic Amer­i­can com­pany.

Here’s what you need to know ahead of the bankruptcy auc­tion .

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. Lam­pert was ac­cused of fo­cus­ing on cost-cut­ting at the ex­pense of in­vest­ing in stores. He in­sisted the com­pany was work­ing to turn it­self into a smaller but prof­itable re­tailer.

As time went on, Sears kept shrink­ing. 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: It’s pos­si­ble ESL won’t emerge as the win­ning bid­der, and it’s not clear whether the com­pany has any other of­fers from buy­ers who want to save, rather than liq­ui­date, Sears. An at­tor­ney rep­re­sent­ing Sears cred­i­tors told the U.S. Bankruptcy Court at a hear­ing Tues­day in New York that it con­tin­ues to have “sig­nif­i­cant con­cerns” about ESL’s bid.

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. ESL also has said it would bid on some pieces of the busi­ness in­di­vid­u­ally. It’s also pos­si­ble that some­one could buy Sears’ in­tel­lec­tual prop­erty and try to bring the brand back on­line or in bricks-and­mor­tar stores.

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