- Sears Holdings has filed for Chapter 11 bankruptcy protection.
- The company plans to close a further 142 stores by the end of the year.
- Edward Lampert has stepped down as CEO.
On Monday, October 15, Sears Holdings filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the Southern District of New York.
Sears Holdings said that it plans to reorganize around a smaller store platform of EBITDA-positive stores, and will close 142 unprofitable stores toward the end of the year; this is in addition to 46 previously announced closures. The company is in discussions with ESL Investments regarding a stalking-horse bid for the purchase of a large portion of the company’s store base. ESL Investments is the company’s largest stockholder and creditor, and is led by Sears CEO Edward Lampert.
Lampert has stepped down from his role as CEO. He will remain Chairman. The Board has created an Office of the CEO, which will be responsible for managing day-to-day operations. The Office of the CEO will be composed of Robert A. Riecker, Chief Financial Officer; Leena Munjal, Chief Digital Officer, Customer Experience and Integrated Retail; and Gregory Ladley, President of Apparel and Footwear.
The Board has formed a special committee that will oversee the restructuring process and have decision-making authority with respect to transactions involving affiliated parties.
Mohsin Y. Meghji, Managing Partner of M-III Partners, has been appointed Chief Restructuring Officer.
William L. Transier, Chief Executive Officer of Transier Advisors LLC, has joined Sears Holdings’ Board as an independent director. Sears Holdings pointed to Transier’s extensive restructuring experience involving companies with complex capital structures.
Sears Holdings said it has received commitments for $300 million in senior priming debtor-in-possession financing from its senior secured asset-based revolving lenders and is negotiating a $300 million subordinated DIP financing with ESL Investments.
Sears and Kmart stores and websites remain open. Lampert said, “As we look toward the holiday season, Sears and Kmart stores remain open for business and our dedicated associates look forward to serving our members and customers.”
Lampert also commented:
Over the last several years, we have worked hard to transform our business and unlock the value of our assets. While we have made progress, the plan has yet to deliver the results we have desired, and addressing the Company’s immediate liquidity needs has impacted our efforts to become a profitable and more competitive retailer. The Chapter 11 process will give [Sears] Holdings the flexibility to strengthen its balance sheet, enabling the Company to accelerate its strategic transformation, continue right-sizing its operating model, and return to profitability.