The Real Deal New York

As Sears totters on the edge of bankruptcy, talks are reportedly underway to save part of the chain

Hundreds of stores could be up for grabs
October 14, 2018 09:00AM

Sears CEO Eddie Lampert and a Sears store. (Credit: Phillip Pesar via Flickr and Getty Images)

Sears Holdings’ executives and lenders are supposedly negotiating over the fate of the long-standing, much-beleaguered retail chain.

According to Bloomberg, Sears could declare Chapter 11 bankruptcy as early as Sunday, as the Oct. 15 maturation date of a $134 million debt package looms large. The retailer would then file for court protection, secure a loan of between $300-$500 million and a smaller version of the chain would emerge from the ashes to continue operations, according to Bloomberg sources close to the talks on Friday.

Previously, Sears has secured cash by selling stores to Seritage Growth Properties, a real estate investment trust which the retailer formed in 2015 to convert Sears and Kmart stores into different properties, such as offices, high-end retail and residential complexes. In August, Sears made $2.7 billion by selling 200 stores to the REIT.

But, in the past, after these sales Sears has continued to pay a portion of the insurance and property taxes on its former stores, according to Mark Cohen, a former Sears Canada executive and the current director of retail studies at Columbia Business School. He told the New York Times, “there is something really wrong with this picture” in relation to the arrangement between Sears and Seritage.

With the retailer’s bankruptcy looking more and more likely, a fire sale seems unlikely this time around. As Seritage is 44-percent owned by entities linked to Sears’ CEO and largest shareholder Eddie Lampert — which means he would stand to profit if Sears began liquidating its properties even further — the plan was criticized by creditors.

At the start of August, there were 866 Sears and Kmart stores. [Bloomberg] — Erin Hudson