Sears Files For Chapter 11 Bankruptcy: What You Need To Know
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The ongoing saga of the rise and fall of century-old department store chain Sears is nearing its end. The Hoffman Estates, Illinois-based retailer officially filed for bankruptcy Monday after years of financial struggles and a mountain of debt it has been unable to pay down, including a $134M debt repayment that was due by Monday. Sears online and in-store business will continue to operate as normal during bankruptcy proceedings.
Here’s what Bisnow knows about Sears bankruptcy proceedings so far:
Mired In Debt
News broke Friday that Sears was planning to file bankruptcy and close 142 underperforming stores in a big push to reorganize the company and pay off debt, Reuters reports. This is in addition to the 46 store closures the company announced in August.
By voluntarily entering bankruptcy protection, the company aims to pay off debt to creditors while staying afloat through the holiday season — the biggest shopping season of the year. Sears has roughly $11.3B in outstanding loans and liabilities and $7B worth of assets. According to MarketWatch the retailer is hoping to secure $1.87B in bankruptcy financing to pay off debt and potentially fund a comeback should bankruptcy proceedings go well.
As of Monday, Sears had roughly 68,000 employees — down significantly from the 302,000 it employed a decade ago, the New York Times reports — and 700 stores. Under bankruptcy protection, the retailer will auction and sell stores and additional assets, which Reuters reports could include its Kenmore appliances brand and home services businesses.
Eddie Lampert Out As CEO
Eddie Lampert, Sears’ largest shareholder and the chairman of the board, relinquished his role as CEO Monday, though he will retain his title as chairman.
The board created an Office of the CEO position to oversee and manage day-to-day operations while in bankruptcy. Three executives will oversee this position — Chief Financial Officer Robert Riecker, Chief Digital Officer Leena Munjal and President of Apparel and Footwear Gregory Ladley.
In addition to $300M in debtor-in-possession financing, ESL Investments Inc., Lampert’s hedge fund, is still considering issuing a $300M bankruptcy loan to help Sears pay down debt. The hedge fund is also considering bidding on a large number of stores to be put up for auction during bankruptcy proceedings, MarketWatch reports.
"Over the last several years, we have worked hard to transform our business and unlock the value of our assets," Lampert said 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.”
A Little History
Sears was founded following the American Civil War in the early 1890s. The 132-year-old retail chain, which operates both Sears and Kmart stores, has been credited for pioneering the catalog/department store strategy of selling everything to everyone, the NYT reports. Fast-forward nearly a century and a half and aggressive competition in the form of big-box giants like Walmart and Home Depot and e-commerce competitors like Amazon has put the convenience of shopping in the consumer’s hands, forcing brick-and-mortar businesses to adapt to changing consumer preferences or go under.