Sears Holdings Corp is expected to file for bankruptcy protection in the coming days after the companies recorded sales drop for years. Sears was known to be the world's largest retailer in its most successful years.
Talks between Chief Executive Officer Eddie Lampert and a special board committee will discuss a rescue plan proposed by Lampert that includes asset sales and debt restructuring. Lampert is Sears's biggest shareholder and lender.
It is reported that committee is resisting Lampert's plan because of their concern that creditors and shareholders might file a case against them for favoring Lampert. According to Reuters's source, Lampert's history of financial engineering at Sears for more than a decade through deals connected to ESL investments Inc might be scrutinized by Sears creditors in the bankruptcy court.
The executive and the committee believe that only the bankruptcy court can determine the future of the company. According to a source, talks are now planned that might arrange debtor-in-possession financing for bankruptcy expected in the next few days.
It was reported that the $134 million debt payment to be made by Sears on Monday added to the pressure faced by Lampert and the committee in their attempt to find a resolution. According to Lampert, he is not going to help the company in paying the obligation unless his plan is approved.
According to Chad Brand, President of Peridot Capital Management, the Sears board is already determined to its decision. He added that he had already significantly cut down on the company's bond holdings earlier this year because of concerns circulating form its clients.
Sears sells a variety of products and it is a key tenant of every known mall in the United States during its glory years in the 1960's. However, the company failed to compete with other companies like Amazon.com Inc and Wallmart Inc. because of their technological advancement.
Concerns are circulating that Sears might not survive a bankruptcy process. Last September, Toys 'R' Us filed a bankruptcy protection aiming to survive by restructuring its debt and shutting stores. It was, however, decided that they should close after creditors balked at giving the company a new lifeline.
According to Reuters, if Sears were to file for bankruptcy, the company's financial performance during the coming holiday season could determine its future. In the case of the Toys 'R' Us', revenue in the holiday season in 2017 proved crucial and it failed creditor's expectations.
