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If there was any surprise in Sears Holdings’ bankruptcy announcement it was that the retailer had decided to reorganize under Chapter 11 protection rather than liquidate the business under Chapter 7. After all, what chance does the retailer, which last turned a profit in 2010, have coming out of a reorganization? To many, the announcement seems as though Sears is just kicking the can down the road, giving Edward Lampert and his hedge fund, ESL Investments, more time to extract financial gains from the company before turning the lights out for good.
Some of the biggest news coming out of Sears with the announcement is that Mr. Lampert has stepped down as CEO of the company. He will remain as the board’s chairman. No announcement has been made on who will serve as CEO. Mohsin Meghji, managing partner of M-III Partners, has been named as chief restructuring officer to take Sears through the process of reorganization.
In its filing, the parent company of Kmart and its namesake chain, announced it will close 142 unprofitable stores by the end of the year. These will be in addition to 46 stores that are slated to be closed next month. Going forward, the retailer plans to focus on “EBITDA-positive” locations.
Sears has negotiated an additional $300 million in loans with banks to keep it operating and is in the process of trying to work out a similarly-sized deal with ESL. The hedge fund is also exploring potentially making a bid to buy “a large portion” of the retailer’s stores while Sears is going through Chapter 11.
"Over the last several years, we have worked hard to transform our business and unlock the value of our assets," said Mr. Lampert in a statement. "While we have made progress, the plan has yet to deliver the results we have desired and addressing the company's immediate liquidity needs has impacted our efforts to become a profitable and more competitive retailer.”
Mr. Lampert maintained that reorganizing under Chapter 11 will give the retailer the needed financial flexibility to execute on its strategy going forward.
"As we look toward the holiday season, Sears and Kmart stores remain open for business and our dedicated associates look forward to serving our members and customers,” he said. “We thank our vendors for their continuing support through the upcoming season and beyond."
- Sears Holdings Initiates Processes To Accelerate Strategic Transformation And Facilitate Financial Restructuring – Sears Holdings Corporation
- Sears files for bankruptcy protection; Eddie Lampert steps down as CEO – CNBC
- Sears Files for Chapter 11 Bankruptcy – The Wall Street Journal
- Is Eddie Lampert looking to save Sears or suck it dry? – RetailWire