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The man who has presided overs Sears Holdings as it lurches ever closer to insolvency has proposed a new plan to save it.
Eddie Lampert proposed a massive restructuring of over $1.1B of Sears Holdings' maturing debt and a sell-off of over $2B in its assets, the Wall Street Journal reports. Lampert is Sears' CEO, chairman and largest shareholder, and his hedge fund ESL Investments is the company's largest creditor.
A Securities and Exchange Commission filing from ESL said Lampert's proposal would reduce Sears' debt load from $5.5B to $1.24B if all proceeds from it go to paying off its debts, the WSJ reports. Those proceeds would come from $1.5B in real estate sales and $1.75B in sales of other assets, such as Sears' Kenmore brand of appliances. ESL offered to buy Kenmore from Sears for $400M earlier this year, which the company's board is still mulling.
Since Lampert became the CEO of Sears and Kmart in 2013, both companies have been closing stores and selling assets in an attempt to slow down billions of dollars in losses year after year. One of the biggest such moves was the creation of Seritage Growth Properties, a REIT founded with millions of square feet of real estate once owned by Sears.
Lampert is also the chairman of Seritage, which is experiencing considerable growth thanks to the value of that real estate now that much of it is being redeveloped and Seritage got a massive loan from Berkshire Hathaway. Meanwhile, Sears continues to close stores amid plummeting stock value.
The plan proposed by ESL is meant to stave off bankruptcy, as it includes a provision that would translate discounted debt into equity should Sears return to profitability. ESL and Sears' other creditors would also not receive cash interest payments while Sears sold off its real estate in an agreed-upon 12-month period, with those creditors taking whatever real estate is left unsold at the end of the period in lieu of further debt payments.
ESL argues that moving quickly on the proposal is important, due to Sears having "significant near-term liquidity constraints," as it said in a filing reported by WSJ. But it appears Lampert's plan to save Sears is mostly composed of shedding assets, which it has been doing for years with no success, and increasing its dependence on his own hedge fund.
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