Sears Holdings Files for Bankruptcy after Years of Struggle

Sears Holdings filed for bankruptcy early Monday after years of staying afloat through financial maneuvering and relying on billions of CEO Eddie Lampert’s own money. The company also announced that Lampert will be exiting as CEO, effective immediately, even though he remains as the company’s chairman.

The 125-year-old retailer said on Monday that it was appointing Mohsin Meghji, who is the managing partner of M-III Partners, as its Chief Restructuring Officer.

As part of the bankruptcy, Sears will shut down 142 stores towards the end of the year. It expects to begin liquidation sales shortly.

The bankruptcy filing comes more than a decade after Lampert merged Sears and Kmart, hoping that forging together the two struggling discounters would create a more formidable competitor.

Lampert has dropped assets and spun out real estate, all to pay down the debt the retailer had accumulated when that plan didn’t work. The company still has roughly 700 stores, which have at times been barren, unstocked by vendors who have lost trust. Many of the stores have never been visited by a generation of shoppers.

Lampert, who has a controlling ownership stake in Sears, personally holds some 31 percent of the retailer’s shares outstanding, according to FactSet. His hedge fund ESL Investments owns about 19 percent.

However, even in bankruptcy, Lampert continues to invest in Sears. The retailer said on Monday morning that ESL is negotiating a $300 million debtor in possession (DIP) loan to support it through its bankruptcy. That loan comes on top of an additional $300 million it has secured from investment banks.

“ESL invested time and money in Sears because we believe the company has a future,” the ESL and Lampert stated in a statement on Monday morning.

Lampert also said that he regretted not being able to get the necessary parties to agree to his last efforts to stave off bankruptcy.

Sears’ creditors refused to agree on an out-of-court restructuring proposal that ESL that was put forward in September. They had little assurance by way of collateral of strategy, after years in which Sears’ only shot at surviving came through selling off parts of its business.

The board’s special committee had been tasked with the approval of Lampert’s latest plan, which is a bid to buy his storied Kenmore appliance business and other brands.

Approving Lampert’s offer would have aided Sears make its payment. However, that would also put the board at the center of the spotlight, potentially opening them to the threat of litigation from shareholders who might accuse that Lampert has stripped the business bare.

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