Can Sears Chairman Eddie Lampert’s Last Push Save The Company?

Sears has had a bit of a torrential time the past few months in terms of its bankruptcy proceedings, and it looks like maybe the end is nowhere in sight.  This time, though, the company has caught a break. A bankruptcy judge has ruled that Sears Chairman Eddie Lampert can have another opportunity to buy the company out of its bankruptcy. While this is certainly good for the company’s investors, the move will also save approximately 50,000 jobs.  

Originally, Sears Holdings had said it was going to reject Lampert’s bid to save the company.  However, this would have put the 126-year-old company on the path to liquidation.  

Lampert had offered $4.4 billion to save Sears through an investment from his hedge fund ESL Investments.  One of the biggest unresolved issues, however, is that the company fell short of covering the appointed fees and vendor payment it currently owes, terms which make the company “administratively insolvent.”

ESL protested this decision by Sears but went back to the drawing board.  Over the weekend, then, the firm redrafted its offer, improving the conditions, and pointed to Sears’ advisory fees that racked up during the bankruptcy period.  

So it was good news, at least for ESL (and time will tell, for Sears) that a bankruptcy judge gave Lampert a little more time. This extension, though, will cost a pretty penny.  ESL Investments now has to pay $120 million, as a deposit, by 4:00 pm on Wednesday, which will allow for Lampert to participate in an auction on Monday, which had been scheduled earlier.  At this point, Sears Holdings will compare ESL’s offer with offers that came from other liquidators.  

Lampert was the one who had the very bold plan, all the way back in 2005, to combine two struggling retailers and fortify their brands. Those retailers were Sears, of course, and Kmart.  While this plan was actually quite a savvy one, the merger fell victim to smarter and more intense competition at a time when consumers were changing their shopping habits.  However, some argue that poor management also caused the merger to be less fruitful.