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Sears files for Chapter 11 bankruptcy protection as CEO steps down; will close an additional 142 stores


NKyTribune staff

Sears Holdings Corporation has announced plans to seek Chapter 11 bankruptcy protection and close 142 unprofitable stores near the end of the year.

The closings include the stores at Florence Mall and Cincinnati’s Northgate Mall.

Edward S. Lampert, chairman of Sears Holdings, said in a statement the company has worked hard to to transform the business and “unlock the value of our assets,” but that plan has not achieved the desired results.

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Sears will close 142 unprofitable stores near the end of the year, with liquidation sales to begin soon. That is in addition to the previously-announced closing of 46 unprofitable stores that is expected to be completed by the end of November.

Sears announced plans to close its Florence, Kentucky, and Northgate Mall store in Colerain Township in August and shuttered its Western Hills location in Cincinnati earlier this year.

Once the nation’s largest retailer, Sears has been hit hard in recent years by the success of competitors, such as Walmart and the emergence of online retailers, led by Amazon.

Sears grew its empire through mail-order sales that, for decades, had customers around the country eagerly awaiting the arrival of the company’s new catalog. Sears, however, could not duplicate that success in the fast-growing online retail category in recent years and sales at its brick-and-mortar stores also lagged.

Lampert, will step down as CEO, but remains chairman of the board. An Office of the CEO, made up of company executives, was named to lead the bankruptcy.

An excerpted release from Sears Holdings Corporation is included here:

Sears Holdings Corporation (“Holdings,” “we,” “our,” or the “Company”) (NASDAQ: SHLD) today announced a series of actions to position the Company to establish a sustainable capital structure, continue streamlining its operating model and grow profitably for the long term.

To facilitate these actions, the Company and certain of its subsidiaries have filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York (the “Court”).

“Over the last several years, we have worked hard to transform our business and unlock the value of our assets,” said Edward S. Lampert, Chairman of Sears Holdings. “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 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. Our goal is to achieve a comprehensive restructuring as efficiently as possible, working closely with our creditors and other debtholders, and be better positioned to execute on our strategy and key priorities.”

Lampert has stepped down from his role as Chief Executive Officer of the Company, effective immediately. He will remain Chairman of the Board.

The Company expects to move through the restructuring process as expeditiously as possible and is committed to pursuing a plan of reorganization in the very near term as it continues negotiations with major stakeholders started prior to today’s announcement.

Holdings has received commitments for $300 million in senior priming debtor-in-possession (“DIP”) financing from its senior secured asset-based revolving lenders and is negotiating a $300 million subordinated DIP financing with ESL Investments, Inc. (“ESL”). ESL is the Company’s largest stockholder and creditor, and Edward S. Lampert is ESL’s Chairman and Chief Executive Officer.

Sears Holdings headquarters near Chicago

Subject to Court approval, the DIP financing is expected to improve the Company’s financial position immediately and support its operations during the financial restructuring process.

Holdings has filed a number of customary motions with the Court seeking authorization to support its operations during the restructuring process and ensure a smooth transition into Chapter 11. The Company intends to continue payment of employee wages and benefits, honor member programs, and pay vendors and suppliers in the ordinary course for all goods and services provided on or after the filing date.  

The Company’s Sears and Kmart stores, and its online and mobile platforms, are open and continue to offer a full range of products and services to members and customers. Holdings’ services and brand businesses will also continue to operate as usual.

Customers should expect Holdings’ loyalty programs, including the Shop Your Way membership program, and the Sears and private label credit card rewards programs, to continue as normal. The Company is committed to working with its vendors and other partners to help maintain inventory levels and ensure timely product delivery.

“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 said. “We thank our vendors for their continuing support through the upcoming season and beyond. We also thank our associates for their hard work and commitment to providing millions of Americans with value and convenience.”

Holdings intends to reorganize around a smaller store platform of earnings before interest, taxes, depreciation and amortization (EBITDA)-positive stores. The Company believes that a successful reorganization will save the Company and the jobs of tens of thousands of store associates.

Holdings is currently in discussions with ESL regarding a stalking-horse bid for the purchase of a large portion of the Company’s store base. There can be no assurance that any transaction will be consummated or on what terms any transaction may occur. Additionally, Holdings expects to market and sell certain of the Company’s assets over the coming months.

Holdings will also close 142 unprofitable stores near the end of the year. Liquidation sales at these stores are expected to begin shortly. This is in addition to the previously announced closure of 46 unprofitable stores that is expected to be completed by November 2018.


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