Sears Holdings made it official, filing for Chapter 11 bankruptcy Monday (October 15), gearing up to close 142 stores after decades of declining revenue and hundreds of store closures.
According to a report in Reuters citing the Chapter 11 filing, Sears listed $6.9 billion in assets and $11.3 billion in liabilities. The bankruptcy filing is the culmination of years of effort on the part of Sears and chief executive officer Eddie Lampert to turn the company the billionaire acquired in 2004 around. Lampert had long vowed to bring Sears back to the days when it was a leading retailer, but his efforts failed to take off with consumers. Sears hasn’t had a profit since 2011, and Lampert has faced criticism that he let the physical stores deteriorate. Sears, over the years, has sold the Craftsman brand and is mulling an offer for the Kenmore appliance brand, noted Reuters.
Under the bankruptcy plan, Lampert will be replaced with a three-person committee. Lampert will remain as chairman of the board and Mohsin Meghji, a managing director of the M-III Partners corporate advisory firm, was appointed chief restructuring officer, reported Reuters. How shareholders fare in the bankruptcy will be determined by the willingness of creditors and suppliers to get the business running. Toys 'R' Us tried to come out of bankruptcy last year but had to liquidate six months later, noted Reuters. Sears is gearing up to sell assets and start closing 142 stores that are not profitable by the end of this year. The goal is to reorganize around a smaller portfolio of around 700 stores. Its also looking at selling a big chunk of its stores — which could be purchased by Lampert's hedge fund, noted the report. During the proceedings, Sears and Kmart stores will remain open, with employees getting paid wages and benefits, reported Reuters. “The company believes that a successful reorganization will save the company and the jobs of tens of thousands of store associates,” Sears said in a statement.
Sears said it has a $300 million financing package to fund its operations during the bankruptcy proceedings and was negotiating an additional $300 million, noted Reuters. Sources told Reuters Lampert plans to contribute between $500 million and $600 million to a financing package for the retailer.