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Sears reportedly preparing to file for Chapter 11 bankruptcy protection

10/10/2018
Sears is inching closer to filing for Chapter 11 bankruptcy protection.

The embattled, 125-year-old department store has hired M-III Partners LLC, a boutique advisory firm, to prepare a bankruptcy filing, the Wall Street Journal reported. The filing could occur as early as this week. The report comes on the heels of Sears adding restructuring expert Alan J. Carr to its board of directors. It also comes as Sears approaches a $134 million debt payment, due on Oct. 15, which the cash-strapped retailer previously warned it may not meet.

In September, ESL Investments, the hedge fund run by Sears chairman and CEO Eddie Lampert, proposed a plan that would essentially translate into a wholesale financial restructuring of the company but without a Chapter 11 filing. It includes selling off many of Sears’ remaining stores and asking lenders to exchange their loans for equity stakes in the retailer. (Some of the stores would be leased back to Sears.) It also includes an offer to buy Sears’ signature Kenmore appliances brand for $400 million. A special committee of the board is currently evaluating the proposal.

“There is a slim chance that Sears may avoid the latest bankruptcy threat, especially if lenders and stakeholders quickly agree to the restructuring program put forward by Eddie Lampert,” commented Neil Saunders, managing director of GlobalData Retail. “However, in our view, this is not a long-term solution; it is simply a way to prolong the life of a company that has long since lost the will to live.

As of its latest quarter, Sears was operating some 900 stores (Sears and Kmart) down from 4,000 plus in 2005.
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