Eddie Lampert, CEO of Sears Holdings, is proposing a way to restructure his struggling retail chain’s debt to avoid bankruptcy. It involves selling off another $1.54 billion in real estate and $1.75 billion in additional assets, such as the Kenmore brand and its home services branch, according to an SEC filing.
Lampert, who also is Sears’s chairman, controlling shareholder and biggest creditor, wants creditors to restructure approximately $1.1 billion of debt coming due in 2019 and 2020. Sears faces significant near-term liquidity constraints, including a $134 million maturity due Oct. 15, 2018, and debt maturity reserve requirements on Oct. 1, 2018.
The restructuring plan, if approved by the board and creditors, would reduce Sears’s roughly $5.5 billion in debt to approximately $1.24 billion. The Sears board confirmed that it has received the proposal.
Lampert already had offered to buy Kenmore via his hedge fund, ESL Investments, for $400 million, and has urged the board to divest the Sears Home Improvement and PartsDirect businesses as well.
The latest push to sell off more assets comes after Sears saw $500 million in Q2 net losses. Total comparable store sales for the company declined 3.9% during the quarter, with Kmart same store sales declining 3.7%, and Sears comparable store sales declining 4.0%.
With $11 billion in losses since 2011 and a nearly 60% sales decline in that period (to $16.7 billion in the most recent fiscal year), there have been plenty of questions as to how long Sears can stay in business. The company has closed hundreds of stores since Sears and Kmart merged in 2005, when the retailers had a combined 3,500+ stores. Sears and Kmart now have only 866 stores as of Aug. 4 and will close 46 more stores in November.
There has been plenty of criticism aimed at Lampert’s handling of the company’s downward spiral. Any time Sears sells off an asset (such as the Craftsman brand), detractors point out that it would further strip Sears of any remaining value it has. In some cases, where ESL Investments buys the asset off Sears, Lampert would still own the property and make money on it despite the retailer’s continued financial difficulties.
Lampert wants to restructure Sears’s debt without filing for bankruptcy protection because he views bankruptcy as risky for retailers, according to The Wall Street Journal. He doesn’t want Sears to repeat the fate of Toys ‘R’ Us, which ended up liquidating instead of restructuring, the source said.