Sears Holdings Corp is readying plans for a liquidation after Chairman Eddie Lampert's bid to pull approximately 425 stores out of bankruptcy was rejected, according to Bloomberg, citing people familiar with the matter.
Lampert offered a $4.6 billion package backed by lenders Bank of America and Citigroup, as well as a new participant in the deal - Royal Bank of Canada. The three institutions offered to provide a $950 million basset-backed loan and $350 million revolving line of credit to back Lampert's bid, which would secure the jobs of roughly 50,000 workers of the company's 68,000.
According to Bloomberg's sources, there were gaps in Lampert's financing package and the plan would not have provided enough cash to cover bankruptcy-related costs. It also undervalued inventory and other assets compared to what liquidators were promising to pay.
Part of Lampert's bid relied on the forgiveness of $1.3 billion of Sears debt held by his hedge fund, ESL Investments Inc.
The retailer started laying the groundwork for a liquidation after meetings Friday in which its advisers weighed the merits of a $4.4 billion bid by Lampert’s hedge fund to buy Sears as a going concern, said the people, who asked not to be identified because the discussions are private. If the 125-year-old retailer does die in bankruptcy -- like Toys “R” Us in 2018, and Borders Group Inc. in 2011 -- it would mark the largest fatality yet in the retail apocalypse prompted by a shift to online shopping. -Bloomberg