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Sears Holdings
Corp.
He met with his lenders on Wednesday night to discuss emergency financing for the troubled retailer, according to people close to the case. The meeting ended without an agreement that would allow Sears to continue its business, according to one of the people.
A group of lenders, including Bank of America Corp., Wells Fargo & Co. and
Citigroup
Inc.
push the company to liquidate its assets under Chapter 7 of the bankruptcy filing, as opposed to the reorganization of the business under Chapter 11, said this person.
A bankruptcy filing is expected Monday, while Sears will have to repay $ 134 million in loans, announced the people. They warned that the situation was unstable and that Sears could still find another source of capital to support it through a restructuring.
The Wall Street Journal announced Tuesday that for the first time Sears has retained the services of M-III Partners, a boutique consulting firm, to prepare a bankruptcy filing. The company, which had 866 Sears and Kmart stores on Aug. 4, has not been profitable for seven consecutive years and has closed hundreds of sites.
At Wednesday's meeting, Sears proposed a restructuring plan to significantly reduce the number of its stores, which it expected to be profitable, said the person. But the banks said the surest way to get their money back was to sell all the remaining stores and liquidate the stocks, the person said.
Banks are the largest lenders of a $ 1.5 billion secured line of credit secured by in-store inventory, as well as credit card and pharmacy receivables. Asset-backed lenders are generally the first to be repaid in full, often with the proceeds of liquidation sales in retail bankruptcy cases.
The Wednesday evening meeting in New York brought together dozens of bankers, lawyers and advisers, but dissolved after an hour or so without an agreement being reached.
It's unusual for a company like Sears, which has not made any profits since 2010 and is working with restructuring advisors, not to have bankruptcy financing as close to the possibility of a potential deposit, said restructuring experts.
Edward Lampert, the hedge fund manager who controls Sears and is the main creditor, has repeatedly bailed the troubled retailer with short-term loans. The billionaire CEO does not intend to lend money to the company to make the payment Monday, according to sources close to the record.
Last month, the CEO proposed a $ 5.5 billion extrajudicial debt restructuring of Sears, a $ 1.5 billion divestment of real estate assets and the sale of $ 1.75 billion. asset dollars, including the brand of Kenmore appliances. Lampert offered to buy for $ 400 million.
The Sears board decided not to continue the Kenmore deal, after it became clear this week that Mr. Lampert's broader restructuring plan was not rewarded, another person said. This has prompted the company to seek emergency financing from its lenders.
The company is facing a shortage of cash as it has to store its remaining Sears and Kmart stores for the holidays. Many suppliers, from appliance manufacturers to toy manufacturers, now demand that Sears pay cash. He needs hundreds of millions of dollars just for this holiday season, said one person.
Although Lampert's hedge fund, ESL Investments Inc., has provided Sears with hundreds of millions of dollars in loans, the company has also borrowed from major banks and major investors.
In September, its lenders also included Cascade Investment LLC, which manages the fortune of the co-founder of Microsoft Corp. Bill Gates, and the Fairholme Capital Management hedge fund, whose director, Bruce Berkowitz, left the Sears board last year.
Write to Suzanne Kapner to [email protected] and Lillian Rizzo to [email protected]
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