Sears Holdings Corp filed for Chapter 11 bankruptcy on Monday with a plan to close 142 more stores, throwing into doubt the future of the century-old retailer that once dominated US malls but has withered in the age of internet shopping.
The talks with lenders envision a restructuring using the Chapter 11 bankruptcy process, with Sears filing on Sunday at the earliest, said the person, who asked not to be identified discussing confidential matters. The operator of Sears and Kmart stores joins a growing list of retailers that have filed for bankruptcy or liquidated in the last few years amid a fiercely competitive climate. The company later became Sears, Roebuck and Co and began selling everything from homes to hardware, becoming the largest retailer in the country until Walmart replaced it in 1990.
The company already has commitments for US$300 million of debtor-in-possession financing from its senior secured asset-based revolving lenders, according to the statement, and it's negotiating a US$300 million subordinated DIP financing with Lampert's hedge fund, ESL Investments Inc. The future of the stores could hinge on Sears' negotiations with landlords over their leases.
Sears, which sold everything from Craftsman tools to Kenmore appliances, lost its footing in the 1980s with expansions into financial products such as banking, mortgages, insurance and credit cards.
The company has racked up 6.26 billion USA dollars in losses, excluding one-time events, since its last annual profit in 2010, according to Ken Perkins, who heads the research firm Retail Metrics LLC.
A spokesman for Lampert declined to comment on details of the bankruptcy financing, while a Sears spokesman and spokespeople for the banks didn't immediately respond to requests for comment.
Holdings will also close 142 unprofitable stores near the end of the year.
The company also announced Tuesday that it added a new member to its board of directors who is familiar with bankruptcies and restructuring: Alan Carr, CEO of the restructuring advisory firm Drivetrain.
"Over the last several years, we have worked hard to transform our business and unlock the value of our assets", said Edward S. Lampert, Chairman of Sears Holdings.
The company began as a mail order catalogue in the 1880s, featuring items from bicycles to sewing machines to houses.
At its peak in the 1960s, Sears sold everything from toys to auto parts to mail-order homes, and was a key tenant in nearly every big mall across the United States.
Judge Robert Drain will oversee the bankruptcy, with Sears represented by the law firm Weil Gotshal & Manges, according to court documents. Sears merged with Kmart in 2005. Lampert partially spun off the company from its parent in 2012 and was Sears Canada's biggest shareholder. It has had 11 years of straight annual drops in revenue.