Sears Files For Chapter 11 Bankruptcy

( Reuters) – Sears Holdings Corp filed for Section 11 bankruptcy on Monday, throwing into skepticism the future of the century-old retailer that once predominated U.S. malls but has withered in the era of internet shopping.

The Chapter 11 filing to regroup debts of the parent of Sears, Roebuck and Co and Kmart Corp follows a decade of revenue drops-off, the thousands of store closures, and years of deals by billionaire Chief Executive Officer Eddie Lampert in an attempt to turn around the company he bought in 2004.

Lampert had pledged to restore Sears to its beauty days where reference is owned the tallest building in the world and companies that included a radio terminal and Allstate insurance.

But the company has not turned a profit since 2011, and commentators say Lampert let the storages deteriorate over its first year, even as he bought the company’s stock and lent it fund. It has sold off the famed Craftsman brand and is considering an offering from Lampert for the Kenmore appliance name.

Managing Partner

Shannon Stapleton/ Reuters
The move to reorganize obligations follows a decade of incomes diminishes and the thousands of storage closures.

The company listed $6.9 billion in assets and $11.3 billion in liabilities in documents filed in the U.S. Bankruptcy Court in the Southern District of New York.

The bankruptcy filing was triggered by a stalemate between Lampert, the company’s biggest shareholder and lender, and a special board committee, over a salvage plan proposed by Lampert.

Shareholders generally lose their investment when a company records for insolvency, and the fate of Sears itself will depend on the willingness of both creditors and suppliers to keep the company afloat.

The largest U.S. plaything retailer, Toys’ R’ Us, tried to emerge from its 2017 insolvency filing but was necessary to liquidate six months later after creditors lost confidence in its turnaround plan.

Shares in Illinois-based Sears shut at about 41 cents on Friday, down from over $100 in the years after hedge-fund ace Lampert, formerly hailed as another Warren Buffett, merged it with discount store Kmart in a $11 billion deal in 2005.

Sears dates back to the late 1880 s and its mail-order catalogs with merchandise from dolls, medication and gramophones to vehicles, kit houses and memorials made it the Amazon.com Inc of its time.

Chicago’s Sears Tower was the world’s tallest construct when it was completed in 1973, but in the following decades consumers increasingly turned to e-commerce and brick-and-mortar competitives such as Walmart Inc and Target Corp.

Lampert and his hedge fund ESL Investments Inc own just shy of 50 percent of Sears’ shares and are its biggest creditor, with about $2.5 billion owed to the executive and funds he controls.

LAMPERT’S INVESTMENTS

One of the loitering a matter of investors has revolved around the value of Sears’ resources, which include prime real estate.

The company sold 235 of its best stores for $2.7 billion to a Lampert-created company, Seritage Growth Properties. Lampert also grew Land’s End Inc’s biggest shareholder when the clothing producer was spun out of Sears in 2014.

Those bargains could be subjected to new scrutiny by Sears’ creditors in bankruptcy court.

“When you go into a bankruptcy, you’re living in a fish bowl and every transaction will be look back and examined, ” said Corali Lopez-Castro, Managing Partner at statute firm Kozyak Tropin& Throckmorton.

In an earlier attempt to avoid insolvency, Sears last year sold its Craftsman tool brand to power tool manufacturer Stanley Black& Decker for $900 million. It likewise signed a deal to sell Kenmore devices on Amazon.com.

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