Sears Holdings Inc. board chairman Eddie Lampert appears to have come out on top in an auction for substantially all of the struggling former retail giant’s assets, but creditors believe that the company is doomed in any case and that Lampert’s $5.2 billion bid will simply serve to delay its demise while Lampert profits.
After a marathon negotiating session that began Jan. 14, Sears Holdings accepted their board chairman’s bid for the company’s assets just after 3 a.m. on Jan. 16. Lampert’s bid would keep open about 425 Sears and Kmart stores and save the jobs of some 45,000 employees.
Creditors had submitted rival bids to liquidate the company.
Sears Holdings Inc. filed for Chapter 11 bankruptcy protection in U.S Bankruptcy Court in the South District of New York on Oct. 15, 2018. Judge Robert Drain is presiding over the case. It will be his decision on whether or not to accept the winning bid.
According to a filing with the Securities and Exchange Commission, the bid includes $850 million in cash funded through the proceeds of a new $1.3 billion asset-based loan, a credit bid of $1.3 billion, some $621 million in debt forgiveness and other instruments.
Among the stores saved by Lampert’s bid is the one at North Riverside Park Mall. That store was radically downsized in 2017; it now occupies just half of the space it formerly did at the north end of the mall.
Sears occupies about 90,000 square feet in the upper floor of a two-floor anchor space at North Riverside Park Mall, which is owned by Seritage Growth Properties.
Seritage, a real estate investment trust created by Sears Holdings in 2015, purchased 250 Sears and Kmart store properties and has been working to attract new, higher-paying tenants to the spaces.
Lampert’s hedge fund, ESL Investments, owns a significant percentage of Seritage Growth Properties and he serves as the trust’s chairman of the board.
Round One, a family amusement complex which opened Dec. 22, 2018, occupies half of Sears’ former lower level at North Riverside Park Mall. Seritage is building out the other half in order to attract other tenants to the lower level.
A hearing to approve the sale of Sears to a company affiliated with ESL Investments is scheduled for Feb. 1, with the transaction expected to close on Feb. 8.
Meanwhile, a committee representing Sears’ creditors blasted the selection of Lampert’s bid in a Jan. 17 court filing, saying that Sears’ present predicament “was precipitated by years of misconduct by Lampert, ESL and others against its creditors.”
The court filing states that the people selected Lampert’s heavily leveraged bid “were handpicked by and are beholden to Lampert and ESL” and that the company’s “downfall is nothing short of tragic.”
Creditors accuse Lampert of stripping Sears of its valuable assets, including real estate and brand names like Craftsman tools and Land’s End, shielding them from creditors’ claims while maximizing benefits to ESL Investments.
While Lampert’s bid saves tens of thousands of jobs and 425 stores, under his direction Sears has closed 3,000 stores and eliminated 250,000 jobs in the process.
“ESL’s current bid to ‘save the company’ is nothing but the final fulfillment of a years-long scheme to deprive Sears and its creditors of assets and its employees of jobs while lining Lampert’s and ESL’s own pockets,” creditors stated in their Jan. 17 filing.
Creditors also cast doubt on Sears’ long-term viability under Lampert’s continued leadership.
“Lampert and ESL have painted themselves as saviors, stating their bid will save the few jobs they have not already eliminated – but for how long?” creditor’s asked in their court filing. “They have failed to set forth a business plan that offers any viable go-forward path. Sears simply cannot survive as a going concern.”