Sears Files for Chapter 11 Bankruptcy

Discussion in 'Wall St. News' started by ajacobson, Oct 15, 2018.

  1. Front page of the WSJ

    Sears is expected to close at least 150 stores immediately. PHOTO: RICHARD B. LEVINE/ZUMA PRESS
    Lillian Rizzo and
    Suzanne Kapner
    Updated Oct. 15, 2018 1:10 a.m. ET

    Sears Holdings SHLD 18.97% Corp. filed early Monday for bankruptcy protection from creditors, marking the collapse of a company that dominated American retailing for much of the 20th century.

    The retailer, which sought chapter 11 protection in U.S. Bankruptcy Court in White Plains, N.Y., reached a deal with its lenders that will allow the 125-year-old company to keep hundreds of its stores open for now.

    As part of the deal, Sears is expected to close at least 150 stores immediately, according to people familiar with the matter. Currently, the company operates roughly 700 Sears and Kmart stores. It employs about 70,000 people.

    The bankruptcy filing came before Sears, which has closed hundreds of stores and struggled with losses for years, was required to repay $134 million in loans later on Monday.

    Lenders agreed to provide between roughly $500 million and $600 million in bankruptcy financing, said people familiar with the matter, which would enable the company to keep operating while it restructures and seeks buyers for assets.

    Sears Chief Executive Edward Lampert, who merged Kmart with Sears and controlled the company for more than a decade, was expected to contribute to the bankruptcy financing, some of the people said.

    “Everything I have done as an investor in Sears Holdings has been with the goal of helping the company and its people succeed,” Mr. Lampert said in a statement provided by his hedge fund. The CEO is also Sears’s biggest shareholder and one of its largest creditors.

    Mr. Lampert said his hedge fund will continue to press for Sears to emerge from bankruptcy in a stronger position. “I invested so much of my time and money in the company because I believe Sears has a future,” he said.

    Mr. Lampert believes the company can reorganize around roughly 300 of the most profitable stores, a person familiar with his thinking said. However, this person said, it is possible even those stores will eventually be sold.

    The plan that Sears and its lenders scratched out over the past week isn’t unfamiliar. Dozens of retailers have sought chapter 11 protection in recent years because of the consumer shift to online shopping, expensive store leases and heavy debt burdens.

    Retailers such as Claire’s Stores Inc., Bon-Ton Stores Inc., Payless ShoeSource Inc., and Gymboree Corp. have all sought chapter 11 protection with early plans to close stores. Gymboree and Payless emerged from bankruptcy protection still operating, with a smaller footprint.

    Others haven’t been as fortunate. Toys “R” Us Inc. and Bon-Ton each sought chapter 11 protection with the hope of surviving. Bon-Ton, which operated more than 250 stores, looked for an owner or investor that would keep the chain alive but fell short and was sold to a small group of bondholders and pair of liquidators that closed the entire chain.

    Toys “R” Us sought chapter 11 protection last September, and although it didn’t have a reorganization plan or prospect to sell the chain, its management still hoped to survive the filing. Following a disastrous holiday season, though, it was ultimately decided to liquidatethe more than 800 big-box toy stores in the U.S., and sell or liquidate its international businesses.

    When a company seeks bankruptcy protection, it must receive a judge’s approval to cut any checks or make most decisions regarding its path forward, including paying its employees, utility bills and other standard operations procedures. In addition, the company likely will seek immediate approval to begin using a bankruptcy loan to make these payments and keep some stores operating.

    Sears’s restructuring plan is expected to be presented to the judge Monday following days of marathon negotiations between the embattled retailer and its bank lenders, Bank of America Corp. , Wells Fargo & Co., and Citigroup Inc.

    The banks are the principal lenders on a $1.5 billion asset-backed credit line, secured by store inventory as well as credit-card and pharmacy receivables. Much of that credit line has been drawn down, leaving the retailer desperate for cash as the holidays approach and a Monday loan-repayment deadline loomed.
  2. Handle123


    The writing was on the wall in January 2007 making a high and where S&P when higher, Sears went lower in 2008, then again when it broke triple lows on monthlies at 17.50-ish, best deals were selling short. It is a shame though, but sign of the times that brick and mortar is too expensive to maintain in malls where customers are declining. Just like JC Penny had to leave the malls, eventually many malls are excellent huge expensive real estate and will be leveled. imo
  3. Here4money


    Amazing to think it, I've probably been to a mall 5 times in years...mostly to catch a movie.
    Last edited: Oct 15, 2018
    WeToddDid2 likes this.
  4. tomorton


    At least there was plenty of chart warning ahead of time.

    I'm sorry (a little) for the private shareholders, maybe ex-employees. Must be a worrying day for them.
  5. There's still Sears employees?! Shareholders?!!!

    And here I thought ESL investments had drained the assets as its creditors...

    Hopefully the bankruptcy court sees this for what it is, freezes the accounts, and leaves the shareholders and creditors holding the bag. Anyone still on board with this deserves to lose their money.
  6. tomorton


    As far as experienced traders and investors are concerned I agree. But a company like this will have surely put shares up to their employees, either free or discounted, many of these people knowing nothing of stock market risks. Sorry for them if they're stuck with losses.
    bullmarket79 likes this.
  7. Handle123


    I go to the malls as nice place to walk during increment weather, and during the day, they are empty. I always park on Sears entrance and so easy to get spaces 1-3 from front, when you go inside only employees I see are doing both cashiers and stocking on each floor, there more employees in eyeglasses shop than entire floor, you could walk off with a tractor. But they do have what I use for better prices than anywhere else in town as far as soap and even decent 34 inch long in pants occasionally since I have lost 230 lbs.
  8. dealmaker


    Here4money likes this.
  9. maler


    As Victor used to say, nothing is more powerful than an idea whose time has come. MrBezos.png
    Here4money likes this.
  10. I am very sad...It's like they wanted this to happen...I thought their rewards plan was genius "shop your way" rewards...Vehicle pick up was awesome. It's like the old guys just didn't hire the young guys early enough to remain competitive. Sears had some great ideas concerning reaching the customer with their rewards program. Amazon could learn from them.

    #10     Oct 15, 2018