Sears may be preparing to file for bankruptcy ahead of a Monday debt payment
11 October, 2018, 02:41
Sears Holdings is getting things in order for a bankruptcy filing that could come sometime this week.
Where we were: Sears's struggles are nothing new, and have been an overhang for some real estate owners.
Even a retail rally hasn't been able to save Sears.
Sears was at one point America's largest retailer and its largest employer. The stock is down some 90% in 2018, and just keeps falling. It hired boutique advisory firm M-III Partners LLC, the Wall Street Journal reported late yesterday, citing people familiar with the situation it didn't identify.
Sears did not immediately return Fortune's request for comment on the WSJ report.
That may be bad news for Sears shareholders that have hung on this long, but some malls are likely breathing a long-awaited sigh of relief, writes Wells Fargo'sJeffrey Donnelly. The company thinks it found a director who can help do the trick.
The committee has been resisting the plan amid concerns that creditors and shareholders would sue over it being too favorable for Lampert.
The impetus for the fast-moving bankruptcy preparation is a $134 million debt payment due this coming Monday. The company has a total of about $5.6 billion in outstanding debt and is down to about 820 Sears and Kmart stores.
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It followed a bleak session in Europe, where Germany's Dax and France's Cac 40 had each ended the day more than 2% lower. A move of more than two deviations, or 40 basis points now , leads to negative S&P 500 returns, Goldman says.
Lampert has invested and lent to Sears many times over the years, making him and his hedge fund the company's largest shareholders with a stake just shy of 50 percent, as well as its biggest creditor, with about $2.5 billion owed to him or funds he controls.
But many flailing retailers have tried that tactic before and failed (see: Toys "R" Us).
Sears revealed Tuesday night that investor Bruce Berkowitz of Fairholme Capital Management dumped 142,000 shares of Sears in the last few days, for only 59 cents to 65 cents a share. But its declines goes back decades, well before the growth of online shopping that threatens traditional brick-and-mortar retailers. The retailer closed its last Sears store in Chicago in July and has announced plans to close another 46 stores by November, including a Kmart in Steger and a Sears in Bloomington.
If Sears were to file for bankruptcy, its financial performance during the upcoming holiday season could prove crucial in determining its future, according to the sources. It has lost $11.7 billion since 2010, its last profitable year.
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