Eddie Lampert's fund proposes a restructuring plan to avoid bankruptcy.
24 Sep, 2018FORTUNE.COM
A hedge fund run by the CEO of Sears says time is running out for the struggling retailer and has proposed a restructuring plan that it says would help the chain avoid bankruptcy.
ESL Investments, owned by Eddie Lampert, who holds the top spot at Sears, is proposing the company sell off $1.75 billion in assets including $1.5 billion in real estate to reduce the company’s debt to $1.24 billion, according to a filing with the Securities and Exchange Commission. (Some stores would be leased back to Sears.)
“Sears now faces significant near-term liquidity constraints,” the filing said, later adding the retailer “must act immediately” to be able to continue its ongoing transformation to return to profitability.
ESL holds a controlling interest in Sears Holdings.
While the ESL plan is careful in its language, it implies that other plans, including a possible bankruptcy filing, could be fatal to the company.
“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,” the group wrote.
Sears faces a $134 million payment due on Oct. 15 and reserve requirements.
Lampert is also chairman of the board at Sears. In a statement, that board said it had received the proposal and was giving it serious consideration.
This isn’t the first proposal from Lampert and his hedge fund. In April, the CEO pushed the board to sell off iconic brands, including Kenmore, with his fund among the potential buyers.
Sears stock has been falling steadily for years as investors worry the business is deteriorating much more quickly than the company can fix it. Lampert has blamed the company’s pension plan, rather than online competitors, for the woes.