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Sears Holdings
Corp.
is in the process of completing an expanded bankruptcy financing plan that will allow it to survive beyond the holiday season, with a view to selling its most profitable stores and other assets.
At the time of the bankruptcy declaration of the retailer, on October 15, a group of banks consisting of Bank of America N.A., Wells Fargo & Co. and Citibank N.A. agreed to contribute $ 300 million in funding. The chairman and former managing director, Edward Lampert, through his hedge fund, ESL Investments, was negotiating with other lenders for an additional loan of $ 300 million.
Now the structure has changed. According to sources familiar with the situation, Mr Lampert's Mr ESL is no longer expected to participate in the financing. Junior lenders including hedge funds and private equity firms, including Cyrus Capital Partners LP, would contribute $ 450 million, and banks would reduce their position to $ 150 million, bringing the new amount to $ 600 million, according to the population.
Earlier court documents show that Cyrus was already in discussion about the bankruptcy loan at the time of filing Chapter 11.
As the company and the lenders get closer to an agreement, the discussions are fluid and could change by the end of the week, people said.
Mr Lampert is now focusing on setting up a so-called harassment offer for nearly 500 Sears stores and other assets, including the Kenmore brand, said one of the people. The proposal, which would be the subject of higher and more advantageous offers, would likely consist of cash and the cancellation of part of the $ 2.6 billion debt contracted by ESL, said the person.
Sears told newspapers that nearly 400 profitable stores would be the focus of the sales process, but that other assets could be part of it.
Prior to Sears' bankruptcy, the Wall Street Journal reported that bank lenders were in a tougher position and were willing to provide bankruptcy financing that would allow Sears to sell inventory and close all of its stores. There have also been other discussions with banks about upcoming store closures, two people said.
Sears will close 142 unprofitable stores by the end of the year, in addition to the 46 stores expected to close by the end of November. The company currently operates 687 Sears and Kmart stores. It employs about 68,000 people.
In a recent hearing, a Sears lawyer said that the company's advisors were in the process of negotiating financing and were still trying to contact potential lenders to take part in the loan. In addition, the lawyer said that different funding structures were under study.
A hearing to approve funding is scheduled for November 15. At the same hearing, Sears will seek approval to proceed with a January auction sale schedule.
The sale must be finalized no later than February 8 in order to respect the sales schedule put in place by some of its bank lenders, according to the documents of the Court.
Reuters had previously announced the new financial package.
Write to Lillian Rizzo to [email protected] and Suzanne Kapner to [email protected]
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