The company’s Chairman Eddie Lampert has offered to pay $4.4 billion to rescue Sears and its 50,000 employees by buying it out of bankruptcy. He would pay through his hedge fund, called ESL Investments.
The offer, mostly funded through outside capital, faces a tough hurdle: Sears advisors are not sure if they want to accept Lampert’s offer because it raises some flags. The money is not enough to cover the fees and vendor payments owed, so Sears considers it “administratively insolvent.”
If the two sides can’t come to an agreement, the 125-year-old store, which also owns Kmart, might have to liquidate. The advisors have until Friday (Jan. 4) to decide whether they think the bid is a viable option. The deadline for the decision, 4:00 p.m., came and went, and the company did not file any documents in bankruptcy court that showed a decision in one direction or the other, according to reports.
One main issue of contention is the $1.8 billion Lampert added to his offer by forgiving ESL debt owed through a credit bid. Sears advisors aren’t sure that a judge will allow a credit bid payment to move forward without looking at a pending investigation about Sears transactions that occurred during Lambert’s leadership of the company.
Those include the spinoff of Lands’ End, which Sears used to own, and transactions with Seritage Growth Properties, a real estate trust that Lampert made through some Sears properties. Sears’ unsecured creditors say there might be claims against the company for those deals.
ESL says all of the transactions it did with Lampert had the approval of the Sears board.
Just because the two can’t come to an agreement doesn’t mean liquidation is inevitable, however. Either side could make concessions to end the disagreement.
Lampert’s offer is the only opportunity the ailing company has to guarantee the employment of its workers, and possibly save Sears’ other businesses, like Sears Home Services. Lampert wants to save Sears and its workers, according to people familiar with the matter.