ESL Investments, the hedge fund run by Sears Holdings Chairman Eddie Lampert, has submitted a $4.6 billion bid for the retailer. Sears Holdings, which operates both Sears and Kmart stores, filed for bankruptcy on October 15 after years of financial struggles.
The offer, which covers the retailer’s approximately 500 remaining stores as well as distribution centers and its headquarters, includes up to $950 million in cash through an asset-based loan facility; a credit bid of $1.8 billion; and the assumption of approximately $1.1 billion in liabilities. The liabilities include gift cards, points from the Sears Shop Your Way loyalty program and protection agreements from Sears Home Services.
In a Dec. 5 letter to Lazard Frères, which is serving as investment banker for Sears Holdings, ESL wrote: “Sears is an iconic fixture in American retail and we continue to believe in the company’s immense potential to evolve and operate profitably as a going concern with a new capitalization and organizational structure. Our proposed business plan envisages significant strategic initiatives and investments in a right-sized network of large format and small retail stores, digital assets and interdependent operating businesses.”
If the hedge fund’s offer is approved, it could save the jobs of approximately 50,000 of the company’s 68,000 employees, according to the ESL letter. The new company, called Newco, also would reinstate the severance program that had been in place prior to the bankruptcy filing.
ESL could face competition from a “stalking horse” bidder that will be named on Dec. 15 in bankruptcy court. This bidder would set the floor for other potential offers.
The company’s unsecured creditors have already said they would prefer the company be liquidated rather than be sold to ESL, according to CNBC. These parties believe Sears will be more valuable in pieces than as a company run under ESL ownership.
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