Sears Files For Bankruptcy Protection, Lampert Steps Down As CEO
Sears Files For Bankruptcy Protection, Lampert Steps Down As CEO from ZeroHedge
The melting ice cube that is Sears – once a shining beacon of American consumerism – has finally dissolved.
After missing a $134 million Monday debt payment, as was widely expected, CNBC reported early Monday that Sears filed for Chapter 11 Bankruptcy protection in bankruptcy court in White Plains, New York. To be sure, filing for Chapter 11 protection is a victory of sorts for Lampert, who has managed to convince a coterie of Sears’ largest secured creditors, including Bank of America, Citigroup and Wells Fargo, into extending a $300 million debtor-in-possession loan that will allow Sears to continue operating (albeit in an even more limited form) through the end of the year (though, if we had to guess, we’d speculate that Lampert secured the loan by convincing these banks that it was in their best interest to allow Sears management to continue slowly stripping assets from the company instead of resorting to a bankruptcy firesale).
Lampert has also secured another $300 million from outside investment banks (a loan that, we imagine, is backed by Lampert’s assurances that he is shopping for a buyer for Sears’ popular Kenmore appliances brand, though that buyer could end up being ESL, which has the power to forgive Sears debt in exchange for assets).
By staving off Chapter 7 liquidation, Lampert has set up his fund, ESL Investments, as a stalking horse during the bankruptcy auction process. ESL and Lampert own a combined 50% of Sears shares, and ESL is one of its largest creditors. Lampert said Monday that he will step down as Sears CEO but remain on as chairman, while Mohsin Meghji, managing partner of M-III Partners, will step up as the company’s chief restructuring officer.
As part of the bankruptcy, some 142 stores are expected to close by the end of the year, along with 42 that were already in the process of closing, while the company’s remaining 500+ stores will continue operating.
In a statement to the media, Lampert insisted that was doing everything he could “to help the company” succeed, though analysts have disputed this claim, as most believe Lampert is merely staving off the inevitable to allow his firm enough time to continue stripping assets at the best possible price, allowing ESL (and by extension, Lampert himself) to preserve as much capital as possible.