Chairman Eddie Lampert wants to keep Sears Holdings Corp. alive, but a group of the company's creditors say they'd be better off if Sears were dead.
The plan envisioned by Lampert amounts to "an unjustified and foolhardy gamble with other people's money," the unsecured creditors committee said in court papers Friday. Staying in operation long enough to allow a sale would burn through as much as half a billion dollars, which should instead go to creditors, the group said.
Sears filed for bankruptcy protection Oct. 15 after years of decline, and on Nov. 2 proposed to auction off its highest-performing stores. That could open the way for Lampert, Sears' largest shareholder and creditor, to hold on to the best parts of the retail empire without spending a dime by making a so-called credit bid -- trading the debt he holds for ownership.
But Sears can't be saved, the unsecured creditors group said. The company's plan "appears to be nothing more than wishful thinking," it said, leaving the group "no choice" but to request the bankruptcy court deny the request to pursue the store sale.
A spokesman for Lampert's ESL Investments Inc. declined to comment, and representatives for Sears, based in Hoffman Estates, Ill., did not respond to requests for comment.
Sears is next expected in court Thursday, when it will formally present its plan to keep the lights on through the Christmas season and announce its deal with new lenders to help finance the next couple of months of bankruptcy. The company is also looking to raise new cash through an auction of about $900 million of notes that are essentially loans from one Sears unit to another.
Securing new financing is crucial given the rate at which the company is spending, Sears lawyer Ray Schrock said Oct. 15.
"When you look at the cash burn associated with the overhead of the enterprise, it's really something where things have to move very quickly," Schrock said. "It really has to happen on an expedited time frame."
Unsecured creditors include suppliers such as Whirlpool and Coca-Cola., vendors such as Waste Management and landlords such as Simon Property Group. Unsecured creditors are often among the last in line to get paid in a bankruptcy, assuming anything is left over for them after bank lenders and bondholders collect, and relations with Sears have turned contentious since the committee was organized on Oct. 24.
Information for this article was contributed by Josh Saul of Bloomberg News.
Business on 11/13/2018