Sears shares dive 27% after report says retailer is preparing for bankruptcy

Marco Green
October 10, 2018

Sears Holdings Corp is preparing to file for Chapter 11 bankruptcy protection in the coming days, sources said on Wednesday, casting doubt over the future of what was once the world's largest retailer and sending its shares to a record low.

The appointment comes as Sears Chairman and Chief Executive Edward Lampert, who is also Sears's biggest lender and its controlling shareholder, is pushing the rest of the board to approve a rescue plan to avoid a bankruptcy filing.

The committee has been resisting the plan amid concerns that creditors and shareholders would sue over it being too favorable for Lampert. CNBC earlier reported that the company was arranging a bankruptcy loan, known as debtor-in-possession financing.

Sears had no comment on the report.

Sears faces US$134 million of debt maturing on October 15, and Lampert's ESL Investments said in a filing last month that the borrowings coming due were among those creating "significant near-term liquidity constraints" for the company. When Lampert took over as head of the company five years ago, there were 2,000 stories. Sears previously said any decision would require approval of its independent board members. Sears' acting spokesman, Howard Riefs, said Brathwaite had informed the retailer of his exit last month.

At its peak in the 1960s, Sears sold everything from toys and auto parts to mail-order homes, and was a key tenant in nearly every big mall across the United States.

It is not clear whether Sears would survive a bankruptcy process.

The Wall Street Journal quoted sources saying Lampert wants to restructure and is anxious that a bankruptcy filing will lead to a liquidation, which has happened with so many retailers, the most recent being Toys R Us.

"I don't think it is an immediate drive to bankruptcy, but clearly the options are limited", said David Tawil, president and co-founder of Maglan Capital, which follows distressed companies.

Sears shares are down 35 percent this morning and trading at 38 cents a share. The company is now $5.6 billion in debt.

The Hoffman Estates, Illinois-based retailer has posted seven straight years of losses and its sales have not grown since the 2008 financial crisis.

The company has closed hundreds of stores and has put other famous brands on the block as it burns through money and sees more customers abandon its often-neglected stores.

Watch Sears trade in real time here.

Other reports by Click Lancashire

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