Sears Reportedly Working On Bankruptcy Filing

Facing a large debt payment, Sears Holdings is reportedly working with boutique consulting firm M-III Partners to prepare a bankruptcy filing. Sources familiar with the matter told The Wall Street Journal that M-III Partners staff have been at the company’s headquarters.

However, the sources told WSJ that the retailer is looking into alternatives to avoid a restructuring in court. While $134 million worth of debt comes due for Sears on Monday (Oct. 15), Sears CEO Edward Lampert could make the payment. Lampert is also the company’s largest creditor and shareholder.

Sources have also said that Lampert has asked AlixPartners, Lazard and lawyers at Weil, Gotshal & Manges LLP for advice. And, on Tuesday (Oct. 9), Sears reportedly brought on a new director, Alan Carr, who is a restructuring expert. Carr, who heads up a restructuring consulting company, has previously been a board member for companies going through the bankruptcy process.

The news comes as Lampert was pitching a rescue plan in an effort to avoid bankruptcy. He wants the retailer’s board to sell assets and creditors to refinance debts. Lampert was seeking to restructure the retailer’s roughly $1.1 billion in debt that will be due in 2019 and 2020. In addition, he wanted the board to sell $1.5 billion in real estate assets, and was seeking to have the retailer divest $1.75 billion in assets such as Kenmore and Sears Home Services.

The plan, in all, would bring the retailer’s approximately $5.5 billion worth of debt to around $1.24 billion per a securities filing from Lampert’s hedge fund, ESL Investments Inc. According to the filing, “Sears now faces significant near-term liquidity constraints.” WSJ also noted that the retailer has a payment of $134 million due next month, “which isn’t part of the proposed restructuring.” In August, ESL Investments said that it was seeking to purchase Sears Holdings’ Kenmore brand, as well as the retailer’s home improvement unit. ESL Investments is a hedge fund controlled by Lampert.