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By Tracy Rucinski and Jessica DiNapoli
(Reuters) – A bankruptcy judge on Monday approved $ 300 million in funding to keep the Sears Holdings Corp chain of stores open during the holiday season, giving the century-old retailer that once dominated US shopping centers the ability to stay in business. business.
Sears on Monday filed for Chapter 11 bankruptcy protection in White Plains, NY, to close about 142 of its 700 stores by the end of the year and to sell its stores on Tuesday. perform better at an auction in January to a buyer who will keep them. operational.
Bankruptcy of parent company Sears, Roebuck and Co and Kmart Corp following a decade of revenue declines, hundreds of store closures and years of trading with billionaire Eddie Lampert for the purpose to revive the company he acquired in 2005 for $ 11 billion.
(GRAPHIC: Fall of a Titan – https://tmsnrt.rs/2A3giRQ)
Lampert, who stepped down from his Sears CEO position on Monday but will remain chairman of the board, pledged to bring Sears back to his heyday when he owned the world's tallest building and companies including a radio station. and Allstate insurance.
But the company, which has nearly 70,000 employees, has not made a profit since 2011, and critics say Lampert has let the stores deteriorate over the years, even as he's buying his shares and lent him money, making him his main shareholder and creditor. .
"For someone of my generation, Sears Roebuck was a big deal … Sears has been dying for many years, it's obviously been mismanaged for years and it's a shame," said Monday at the presses US President Donald Trump. US Treasury Secretary Steven Mnuchin served on the Sears Board of Directors between 2005 and 2016.
(GRAPH: REIT of shopping center – https://tmsnrt.rs/2Op4Qcj)
Lampert and its hedge fund, ESL Investments Inc., hold slightly less than 50% of Sears shares and are the main creditor, with approximately $ 2.5 billion owed to it and ESL. Until now, he has not disclosed whether he had realized a profit or a loss since he had invested in Sears after years of complex financial engineering within the society.
NEGOTIATION OF THE FINANCING OF BANKRUPTCY
Beyond funding the bankruptcy of $ 300 million from its existing lenders that Sears had obtained Monday, the retailer announced that it was negotiating additional $ 300 million in funding from ESL's Lampert for the financing of bankruptcy.
Sears has listed assets of $ 6.9 billion and liabilities of $ 11.3 billion in filings in the US Bankruptcy Court in the Southern District of New York. His debt to Pension Benefit Guaranty Corp., a US government agency overseeing the retirement benefits of former Sears workers, was not disclosed in the bankruptcy case.
As part of the bankruptcy plan, Lampert's executive role will be replaced by a three-person committee. Mohsin Meghji, managing director of the business consulting firm M-III Partners, has been appointed director of restructuring.
Sears previously announced the separate closure of 46 unprofitable stores, and announced Monday that the project is expected to be completed next month.
Sears is also studying the sale of a "large portion" of its stores and said that they could be purchased by Lampert's hedge fund at an auction.
Andy Dietderich, Sears investor's lawyer, Bruce Berkowitz, a former member of the retailer's board of directors, said he's worried in bankruptcy court, fearing that Lampert will not control too much the process of bankruptcy.
"Most of the society has disappeared," Dietderich said.
Shareholders generally lose all or most of their investment when a company goes bankrupt, and Sears' ability to exit liquidation will depend on the willingness of creditors and suppliers to keep the company afloat. Significant sales during the upcoming holiday season will be critical in determining it.
Toys & R & # 39; Us, the largest US toy retailer, has tried to pull out of its 2017 bankruptcy filing but was forced to liquidate six months later after creditors lost confidence in its turnaround plan.
SHOP CLOSURES, SALES OF ASSETS
Sears leading suppliers, such as Whirlpool Corp and Electrolux AB, have sought to dispel fears of their exposure to the bankrupt retailer. Whirlpool said the bankruptcy of Sears would have a limited impact on its business, while Electrolux said it did not assess the need for significant one-time costs as an immediate consequence of Sears' debt restructuring.
Meanwhile, Sears and Kmart stores are open. The company indicated that it continued to pay employees' salaries and benefits and worked with suppliers to ensure that its shelves remained stocked.
"The company estimates that a successful reorganization will save the company and the jobs of tens of thousands of in-store associates," Sears said in a statement.
Shares of Sears, an Illinois-based company, closed at around 41 cents on Friday, against more than $ 100 in the years following the creation of star of the Lampert hedge fund, once greeted by Warren Buffett, with the store Kmart discount in a transaction of 11 billion dollars in 2005.
Sears dates back to the late 1880s. Its mail order catalogs, including toys, drugs, gramophones, automobiles, hardware stores and gravestones, made it the Amazon.com Inc of its time.
The iconic retailer, however, gradually lost momentum as consumers turned increasingly to e-commerce and traditional competitors such as Walmart Inc. and Target Corp.
"It's sad that they go bankrupt, but they did not manage it very well, and that's the consequence of not doing things right," said Paul Thompson, Retired 61-year-old Kmart customer in one of his stores. in Bridgehampton, New York.
THE INVESTMENTS OF LAMPERT
One of the outstanding issues for investors has been the value of Sears' assets, which include prime real estate.
The company sold 235 of its best stores for $ 2.7 billion to a company established by Lampert, Seritage Growth Properties. Lampert also became the largest shareholder of Land & End's Inc when the clothing manufacturer was separated from Sears in 2014.
Sears creditors could be seized of these transactions by a new control.
"In bankruptcy, you live in a fish bowl and every transaction will be reviewed and reviewed," said Corali Lopez-Castro, managing partner of the law firm Kozyak Tropin & Throckmorton.
In an effort to avoid bankruptcy, Sears sold last year its Craftsman tool brand to power tool maker Stanley Black & Decker for $ 900 million. He also signed an agreement to sell Kenmore appliances on Amazon.com.
During the summer, a special committee created by Sears is opposed to a Lampert bailout offer aimed at acquiring assets, including the name of the Kenmore aircraft.
(Report by Tracy Rucinski in Chicago and Jessica DiNapoli in White Plains, New York, additional report by Tom Hals in Wilmington, Delaware Melissa Fares in Bridgehampton, New York and Rama Venkat in Bengaluru, edited by Louise Heavens and Nick Zieminski)
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