Front page of the WSJ
Sears is expected to close at least 150 stores immediately. PHOTO: RICHARD B. LEVINE/ZUMA PRESS
3 COMMENTS
By
Lillian Rizzo and
Suzanne Kapner
Updated Oct. 15, 2018 1:10 a.m. ET
Sears Holdings SHLD 18.97% Corp. filed early Monday for bankruptcy protection from creditors, marking the collapse of a company that dominated American retailing for much of the 20th century.
The retailer, which sought chapter 11 protection in U.S. Bankruptcy Court in White Plains, N.Y., reached a deal with its lenders that will allow the 125-year-old company to keep hundreds of its stores open for now.
As part of the deal, Sears is expected to close at least 150 stores immediately, according to people familiar with the matter. Currently, the company operates roughly 700 Sears and Kmart stores. It employs about 70,000 people.
The bankruptcy filing came before Sears, which has closed hundreds of stores and struggled with losses for years, was required to repay $134 million in loans later on Monday.
Lenders agreed to provide between roughly $500 million and $600 million in bankruptcy financing, said people familiar with the matter, which would enable the company to keep operating while it restructures and seeks buyers for assets.
Sears Chief Executive Edward Lampert, who merged Kmart with Sears and controlled the company for more than a decade, was expected to contribute to the bankruptcy financing, some of the people said.
“Everything I have done as an investor in Sears Holdings has been with the goal of helping the company and its people succeed,” Mr. Lampert said in a statement provided by his hedge fund. The CEO is also Sears’s biggest shareholder and one of its largest creditors.
Mr. Lampert said his hedge fund will continue to press for Sears to emerge from bankruptcy in a stronger position. “I invested so much of my time and money in the company because I believe Sears has a future,” he said.
Mr. Lampert believes the company can reorganize around roughly 300 of the most profitable stores, a person familiar with his thinking said. However, this person said, it is possible even those stores will eventually be sold.
The plan that Sears and its lenders scratched out over the past week isn’t unfamiliar. Dozens of retailers have sought chapter 11 protection in recent years because of the consumer shift to online shopping, expensive store leases and heavy debt burdens.
Retailers such as Claire’s Stores Inc., Bon-Ton Stores Inc., Payless ShoeSource Inc., and Gymboree Corp. have all sought chapter 11 protection with early plans to close stores. Gymboree and Payless emerged from bankruptcy protection still operating, with a smaller footprint.
Others haven’t been as fortunate. Toys “R” Us Inc. and Bon-Ton each sought chapter 11 protection with the hope of surviving. Bon-Ton, which operated more than 250 stores, looked for an owner or investor that would keep the chain alive but fell short and was sold to a small group of bondholders and pair of liquidators that closed the entire chain.
Toys “R” Us sought chapter 11 protection last September, and although it didn’t have a reorganization plan or prospect to sell the chain, its management still hoped to survive the filing. Following a disastrous holiday season, though, it was ultimately decided to liquidatethe more than 800 big-box toy stores in the U.S., and sell or liquidate its international businesses.
When a company seeks bankruptcy protection, it must receive a judge’s approval to cut any checks or make most decisions regarding its path forward, including paying its employees, utility bills and other standard operations procedures. In addition, the company likely will seek immediate approval to begin using a bankruptcy loan to make these payments and keep some stores operating.
Sears’s restructuring plan is expected to be presented to the judge Monday following days of marathon negotiations between the embattled retailer and its bank lenders, Bank of America Corp. , Wells Fargo & Co., and Citigroup Inc.
The banks are the principal lenders on a $1.5 billion asset-backed credit line, secured by store inventory as well as credit-card and pharmacy receivables. Much of that credit line has been drawn down, leaving the retailer desperate for cash as the holidays approach and a Monday loan-repayment deadline loomed.
Sears is expected to close at least 150 stores immediately. PHOTO: RICHARD B. LEVINE/ZUMA PRESS
3 COMMENTS
By
Lillian Rizzo and
Suzanne Kapner
Updated Oct. 15, 2018 1:10 a.m. ET
Sears Holdings SHLD 18.97% Corp. filed early Monday for bankruptcy protection from creditors, marking the collapse of a company that dominated American retailing for much of the 20th century.
The retailer, which sought chapter 11 protection in U.S. Bankruptcy Court in White Plains, N.Y., reached a deal with its lenders that will allow the 125-year-old company to keep hundreds of its stores open for now.
As part of the deal, Sears is expected to close at least 150 stores immediately, according to people familiar with the matter. Currently, the company operates roughly 700 Sears and Kmart stores. It employs about 70,000 people.
The bankruptcy filing came before Sears, which has closed hundreds of stores and struggled with losses for years, was required to repay $134 million in loans later on Monday.
Lenders agreed to provide between roughly $500 million and $600 million in bankruptcy financing, said people familiar with the matter, which would enable the company to keep operating while it restructures and seeks buyers for assets.
Sears Chief Executive Edward Lampert, who merged Kmart with Sears and controlled the company for more than a decade, was expected to contribute to the bankruptcy financing, some of the people said.
“Everything I have done as an investor in Sears Holdings has been with the goal of helping the company and its people succeed,” Mr. Lampert said in a statement provided by his hedge fund. The CEO is also Sears’s biggest shareholder and one of its largest creditors.
Mr. Lampert said his hedge fund will continue to press for Sears to emerge from bankruptcy in a stronger position. “I invested so much of my time and money in the company because I believe Sears has a future,” he said.
Mr. Lampert believes the company can reorganize around roughly 300 of the most profitable stores, a person familiar with his thinking said. However, this person said, it is possible even those stores will eventually be sold.
The plan that Sears and its lenders scratched out over the past week isn’t unfamiliar. Dozens of retailers have sought chapter 11 protection in recent years because of the consumer shift to online shopping, expensive store leases and heavy debt burdens.
Retailers such as Claire’s Stores Inc., Bon-Ton Stores Inc., Payless ShoeSource Inc., and Gymboree Corp. have all sought chapter 11 protection with early plans to close stores. Gymboree and Payless emerged from bankruptcy protection still operating, with a smaller footprint.
Others haven’t been as fortunate. Toys “R” Us Inc. and Bon-Ton each sought chapter 11 protection with the hope of surviving. Bon-Ton, which operated more than 250 stores, looked for an owner or investor that would keep the chain alive but fell short and was sold to a small group of bondholders and pair of liquidators that closed the entire chain.
Toys “R” Us sought chapter 11 protection last September, and although it didn’t have a reorganization plan or prospect to sell the chain, its management still hoped to survive the filing. Following a disastrous holiday season, though, it was ultimately decided to liquidatethe more than 800 big-box toy stores in the U.S., and sell or liquidate its international businesses.
When a company seeks bankruptcy protection, it must receive a judge’s approval to cut any checks or make most decisions regarding its path forward, including paying its employees, utility bills and other standard operations procedures. In addition, the company likely will seek immediate approval to begin using a bankruptcy loan to make these payments and keep some stores operating.
Sears’s restructuring plan is expected to be presented to the judge Monday following days of marathon negotiations between the embattled retailer and its bank lenders, Bank of America Corp. , Wells Fargo & Co., and Citigroup Inc.
The banks are the principal lenders on a $1.5 billion asset-backed credit line, secured by store inventory as well as credit-card and pharmacy receivables. Much of that credit line has been drawn down, leaving the retailer desperate for cash as the holidays approach and a Monday loan-repayment deadline loomed.
