Beginning Monday, Sears filed for bankruptcy protection after years of struggle and relentless losses. Sears said in court documents that it has catastrophic consequences if it can not repair its supply chain and allow goods to flow to the stores and warehouses of the company.
In the past two weeks, about 200 salespeople have stopped sending goods to the stores and are facing potential liens if the company is unable to pay logistics companies that owe millions of dollars in the coming weeks, Sears said in court magazines. A similar scenario helped Toys "R" Us Inc., whose suppliers shortened their conditions and stopped sending products just before the holiday last year.
Lampert seems determined to avoid that fate. The financier's hedge fund, ESL Investments, plans to offer a $ 300 million bankruptcy finance package to keep the retailer in business. ESL Investments is also in talks to bid for about 400 of the most profitable Sears and Kmart stores, Sears said on Monday.
At its peak, the company that Mr. Lampert compiled from the merger in 2004 of Sears, the store "where America shops" and big-box retailer Kmart, operated more than 2,300 stores. That number had decreased to less than 700 by submitting Sears & # 39; s Monday.
Sears said it would close 142 unprofitable stores by the end of the year, with sales expected to start shortly. The closures are next to 46 stores that are expected to close in November.
The company currently operates 687 Sears and Kmart stores. Approximately 68,000 people work there.
Sears thanks its lenders and bondholders more than $ 5 billion and the interest payments alone cost the retailer $ 440 million a year. The bankruptcy request came before Sears had to repay 134 million dollars on Monday.
When catalogs ruled the world
Sears was once the dominant American retailer and sold everything from dresses to electric tools. Now hundreds of stores are closed and an uncertain future is expected.
A Sears store in Toronto just before it was closed for the last time last January.
Richard Lautens / Getty Images
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Sears, an American retail business since 1886, has made great efforts in recent years to close stores, sell assets and borrow money. But it was not always that way. Gordon Weil, author of "Sears, Roebuck, USA", looks back at the history of the retailer. Photo: Getty
About 400 stores have a positive income and are supposed to be viable.
"Successful sales of these viable stores as a going concern will not only save Sears and Kmart, but also the jobs of tens of thousands of employees," said Robert A. Riecker, chief financial officer of the company, in court magazines.
The company had set up a $ 1.875 billion bankruptcy finance package a few days ago, the majority of which pays out the existing loans, including $ 300 million in new money in addition to the comparable Mr. Lampert. The financing is provided by Sears bankers, including
bank of America
& Co., and Citibank N.A.
Even with this help, a quick bankruptcy process is needed, company lawyers said on Monday. The company is trying to hold a sale for its assets in January and to complete the bankruptcy process in March.
"Sears has been struggling for a while," said Ray Schrock, the Weil Gotshal & Manges LLP lawyer representing Sears, at a hearing on Monday afternoon in White Plains, N.Y., before US judge Robert Drain. "It is difficult to find a company that has tried so hard to avoid Chapter 11."
As part of the bankruptcy petition Mr Lampert stepped down from his role as chief executive, but remains chairman. Sears said that it had created a CEO's office and named Mohsin Meghji, managing partner of its restructuring consultancy M-III Partners, as chief restructuring officer.
Sears received approval from the court to start using the so-called new-money part of its bankruptcy financing. The loan will be used to keep stores open, paying employees and other standard measures.
Mr Lampert's plan could meet resistance.
Sears "is not so much a melting ice cube as a puddle," said Andrew Dietderich, the lawyer who represents Fairholme Capital Management LLC, managed by Bruce Berkowitz. Fairholme owns approximately $ 330 million in face value in some of Sears' s unsecured bonds.
Mr. Dietderich told the court that Fairholme intends to discuss with other creditors about the investigation of transactions between Sears and ESL, while the retailer under the ownership of Mr. Lampert was.
"Everything I did as an investor in Sears Holdings was aimed at helping the company and its people succeed," said mr. Lampert in a statement from ESL Investments. An ESL lawyer at the hearing said Fairholme signed on all transactions that took place.
President Trump weighed in Monday, calling the filing a "disgrace" and "very sad" for members of his generation.
"Sears was a big problem when I was growing up," said Mr. Trump, 72 years old. "Sears has been dying for many years and has apparently been misused for years."
contributed to this article.
Write to Lillian Rizzo at [email protected]