Thursday, November 14, 2019

Sears begins Chapter 11 process

By on October 15, 2018

SAN JUAN – Sears Holdings Corp. announced Monday that it has filed, along with certain subsidiaries, voluntary petitions for relief under Chapter 11 of the Bankruptcy Code, “to establish a sustainable capital structure, continue streamlining its operating model and grow profitably for the long term.”

The former retail giant will close 142 unprofitable stores “near the end of the year,” it said. Liquidation sales at these stores are expected to “begin shortly.” Forty-six stores had already been announced as closing by November.

The company has more than 500 stateside Sears locations and close to 400 Kmarts. Sears’ Puerto Rico division, which includes 24 Sears stores, Auto Centers and Hardware Stores had previously been sold off. There are 19 Kmart stores on the island.

The company added that it is pursuing a plan of reorganization “in the very near term” as it continues ongoing negotiations with stakeholders, and that it “received commitments for $300 million in senior priming debtor-in-possession (“DIP”) financing from its senior secured asset-based revolving lenders and is negotiating a $300 million subordinated DIP financing with ESL Investments, Inc. (“ESL”).”

It expects court approval of the DIP financing to support its operations during the restructuring process.

ESL is the company’s largest stockholder and creditor, and Edward S. Lampert, who stepped down as Sears CEO but remains its chairman, is ESL chairman and CEO.

The company said it “intends to continue payment of employee wages and benefits, honor member programs, and pay vendors and suppliers in the ordinary course for all goods and services provided on or after the filing date.”

The company’s Sears and Kmart stores, and its online and mobile platforms, are open and continue to offer products, services and run its loyalty programs normally.

“The Chapter 11 process will give [Sears] Holdings the flexibility to strengthen its balance sheet, enabling the Company to accelerate its strategic transformation, continue right sizing its operating model, and return to profitability. Our goal is to achieve a comprehensive restructuring as efficiently as possible, working closely with our creditors and other debtholders…,” Lampert said in the announcing release. “As we look toward the holiday season, Sears and Kmart stores remain open for business….”

Sears intends to reorganize “around a smaller store platform of EBITDA-positive stores. The Company believes that a successful reorganization will save the Company and the jobs of tens of thousands of store associates. Holdings is currently in discussions with ESL regarding a stalking-horse bid for the purchase of a large portion of the Company’s store base. There can be no assurance that any transaction will be consummated or on what terms any transaction may occur. Additionally, Holdings expects to market and sell certain of the Company’s assets over the coming months,” the release reads.

To help lead the company’s restructuring efforts, new members have joined its management and board such as Mohsin Y. Meghji, managing partner of M-III Partners, who was appointed as chief restructuring officer, and William L. Transier, CEO of Transier Advisors LLC, who joined Sears’ board as an independent director.

Additional information is available on the company’s restructuring website at restructuring.searsholdings.com. For Court filings and other documents related to the court-supervised process, visit http://restructuring.primeclerk.com/sears.

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