Sears chairman’s hedge fund bids $4.6 billion for bankrupt retailer

The hedge fund run by Sears Chairman Edward Lampert is offering to buy many of the bankrupt retailer's remaining assets for about $4.6 billion with hopes of keeping the chain in business and continuing to employ about 50,000 of its workers.

The bid from Lampert's ESL Investments includes about 500 Sears and Kmart stores, headquarters and distribution centers, and Sears brands and businesses including Kenmore, DieHard and Sears Home Services.

“ESL believes that a future for Sears as a going concern is the only way to preserve tens of thousands of jobs and bring continued economic benefits to the many communities across the United States that are touched by Sears and Kmart stores,” Lampert's hedge fund said in the letter sent to Sears' investment banker Wednesday and filed Thursday with the U.S. Securities and Exchange Commission.

Sears Holdings Corp., which filed for Chapter 11 bankruptcy protection in October, got the Bankruptcy Court's approval last month to begin auctioning assets, including a group of top-performing stores. The retailer previously received court approval to begin store closing sales at 142 unprofitable stores, including the Kmart in Allentown. That location, at 1502 S. Fourth St., is slated to close by year-end.

The 500 stores Lampert and ESL want to retain include the Sears at Whitehall Mall in Whitehall Township, along with three area Kmarts — one each in Wilson, Walnutport and Wind Gap, according to the SEC filing.

Last month, Sears announced it would close another 40 stores, including Sears locations at Stroud Mall in Stroud Township, Monroe County, and at Berkshire Mall in Wyomissing, Berks County. Both shopping centers also will lose their Sears Auto Centers.

The $4.6 billion offer includes up to $950 million in cash that would be funded by a new loan and a $1.8 billion credit bid, in which ESL would swap Sears debt it holds for ownership of a newly formed company. Other financing includes an estimated $1.1 billion from taking on Sears' obligations to honor Sears Home Services protection agreements, gift cards and loyalty program points.

In the letter, ESL said it believes long-struggling Sears can successfully reorganize around the smaller group of stores. The fund said it expects to continue employing about 50,000 Sears workers and reinstate a severance program in place before the company sought bankruptcy protection.

The bid comes days after Sears filed an updated budget with the Bankruptcy Court showing the retailer expected to earn almost $246 million less during the critical holiday shopping season than it forecast when it declared bankruptcy. The more recent budget came after Sears said it planned to sell 505 stores that would continue in business, about 100 more than initially planned, which may have affected revenue forecasts.

A committee of Sears' unsecured creditors has raised questions about

financial dealings between Sears and ESL and Lampert, who was also the retailer's CEO prior to its bankruptcy filing. Both Sears and the creditors committee are looking into transactions between ESL and the retailer, including loans the hedge fund said amount to $2.4 billion over the past several years.

Others interested in acquiring Sears' assets have until Dec. 28 to submit bids under the timeline approved by the Bankruptcy Court. If other bids come in, the auction would be held Jan. 14.