Sears Holdings CEO and largest shareholder Eddie Lampert proposed that the retailer sell more assets and restructure its debts to further extend its life. In a…
Sears Holdings CEO and largest shareholder Eddie Lampert proposed that the retailer sell more assets and restructure its debts to further extend its life.
In a proposal Sunday to Sears that was disclosed Monday morning in a public filing, Lampert’s hedge fund said the retailer “must act immediately to have sufficient runway to continue its transformation.”
The ESL Investments plan insinuates that the end could be near for Sears if it picks another path.
“We continue to believe that it is in the best interests of all stakeholders to accomplish this as a going concern, rather than alternatives that would substantially reduce, if not completely eliminate, value for stakeholders,” ESL said in the proposal.
The hedge fund noted that Sears faces “significant near-term liquidity constraints,” including a $134 million payment due Oct. 15 and reserve requirements on Oct. 1.
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Sears investors drove the company’s stock down 9 percent to $1.15 at 11:05 a.m.
Lampert’s proposal would include $3.22 billion in asset sales, including the sale of real estate for $1.47 billion.
ESL offered to acquire the real estate after a year, if it can’t be sold to other buyers, in exchange for extinguishing corporate debt.
Sears said it would carefully consider the proposal. The company had already formed a special committee of its board of directors to contemplate Lampert’s previous proposal to acquire Sears’ Kenmore appliances brand. Those negotiations are continuing.
Sears has been battered by digital competitors, the department store sector’s challenges, costly pensions and its own mistakes, including a failure to invest in stores and e-commerce.
Lampert has pulled off a series of financial transactions in recent years that have given Sears more runway, extending its life despite significant sales declines. He has also approved hundreds of store closures and massive cost cuts.
But critics say Lampert has put his hedge fund at the front of the line to collect key debt payments and assets in the event of Sears’ demise.
The latest proposal could indeed allow Sears to live longer, wrote Neil Saunders, managing director of GlobalData Retail.
“That said, while we view these measures as necessary, we do not believe they represent a sustainable solution,” Saunders wrote. “As usual, Sears is focusing on financial maneuvers and missing the wider point that sales remain on a downward trajectory…. In our view, this is simply storing up trouble for the future.”
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
