Chairman Eddie Lampert submitted a bid last week for $4.4 billion through his hedge fund, ESL Investments., for 425 of Sears’ stores, according to Digital Journal.
However, Sears Holdings Corporation rejected Lampert’s take-over bid and plans to ask U.S. Bankruptcy Judge Robert Drain if it can proceed with liquidation, people familiar with the matter told CNBC Tuesday morning.
Should Sears be allowed to liquidate its assets, it will become one of the most high-profile victims in the wave of bankruptcies that have hit the retail sector in recent years owing to the popularity of online shopping. Liquidation will put 68,000 employees out of work. The sources also said that the company’s vast inventories of tools, appliances and store fixtures will be sold in fire sales.
#Sears last bid to stave off liquidation has failed
Goodbye to this 130 year old giant: pic.twitter.com/0PR8BJhpAN
— Black Friday by DealsPlus (@blackfriday_fm) January 8, 2019
ESL Investments and Lampert not giving up
Sources also are saying that Lampert and his hedge fund are protesting Sears’ decision to liquidate and are prepared to give the details on their offer to Judge Robert Drain and make the case for saving Sears.
Lampert’s offer was deemed insufficient by Sears advisers. One of the unresolved issues not addressed was covering the fees and vendor payment it owes, making it “administratively insolvent.” However, ESL wants to point out that the extensive advisory fees that Sears has racked up during bankruptcy are part of Sears’ “administrative expenses.”
Some of those unresolved costs include bills from lawyers and financial advisers and are expected to exceed $200 million. Lampert proposed forgiving $1.3 billion of debt he holds in exchange for ownership of the reconstituted Sears, a bankruptcy maneuver known as a credit bid, according to Reuters.
Eddie Lampert's $4.4 billion offer was Sear's only shot at staying alive and preserving 55,000 jobs. But the bid ultimately came up short. January 8, 2019
What Lampert wants out of all this
Lampert wants a release from legal exposure related to the transactions he completed with the retailer before it filed for bankruptcy protection. Basically, they make Lampert not only the company’s biggest creditor but its biggest shareholder.
Lampert also failed to put up any cash to back up his credit bid. Sources are saying this maneuver may not be allowed in court. Additionally, there are still ongoing investigations into Lampert’s pre-bankruptcy deals, which the hedge fund manager maintains were proper.
Lampert took over Sears in 2005 with an $11 billion deal. He promised to turn the iconic company back to its glory days. Instead, he let the stores deteriorate even as he bought the company’s stock and readily lent them money. And it may have been Lampert’s plan all along to secure the properties due to their higher real estate value.
Philip Emma, an analyst with Debtwire and an expert in retail bankruptcies told CNN News, “The desire to control the real estate was his motivation through this long slide. If there’s any reason Lampert is still involved in this, it’s the value is in the real estate, with a footprint you can’t easily replicate for a variety of reasons.”
