Per the report, ESL must make a $120 million deposit by Wednesday afternoon, which will allow its bid to be compared against liquidator offers when the Sears auction takes place on January 14.
Liquidation appears to be the fate of Sears and its chairman, Eddie Lampert.
Sears' bankruptcy, which includes discount chain Kmart, followed a decade of revenue declines, hundreds of store closures, and years of deals by billionaire Lampert in an attempt to turn around the company he put together in 2005 through an US$11 billion deal. According to Reuters' sources, the bid fell short.
The Sears board rejected Lampert's $4.4 billion bid Friday to acquire 425 Sears stores along with other assets of the bankrupt retailer - and a last-minute scramble to improve the offer has not moved the needle, sources tell The Post.
Sears' lawyers said a revised bid will require Mr Lampert to make a $120m (£94.4m) down payment, through his hedge fund, by 4pm NY time on Wednesday.
Sears has been struggling for several years with bare shelves and displays.
Sears Holdings filed for bankruptcy protection last October.
Under the new terms, Lampert must come up with a $120 million cash payment by Wednesday afternoon, as a down payment.
Many of Sears' major creditors have said they want the company to liquidate.
Abid Qureshi, an attorney representing a committee of Sears' creditors, said they had not been included in those negotiations and continued to have "significant concerns" about ESL's bid.
Troubled US retail giant Sears is considering a revised takeover bid from its chairman's hedge fund after being left on the brink of liquidation.
"I remember at the beginning of summer, we'd start flipping through the catalog, having to get the penny loafers of the Mary Janes, the black and white shoes", she said.
Tuesday's court hearing in the Southern District of NY comes a day after the retailer took to social media to dispel the notion it was not longer in the running, saying in a tweet: "We may be slowing down, but we are not out of the race just yet".
In November, the creditors committee raised questions about financial dealings between Lampert, ESL and Sears, saying those transactions "may be part of an extended pattern of conduct that served to benefit certain (insider) equity holders", according to court filings.