Sears Initiates Chapter 11 Proceedings, Restructuring — Stores Remain Open
Sears Holdings Corporation today (Monday, Oct. 15, 2018) announced it will file for bankruptcy relief under Chapter 11.
According to a news release, 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.
Holdings has received commitments for $300 million in senior priming debtor-in-possession financing from its senior secured asset-based revolving lenders and is negotiating a $300 million subordinated DIP financing with ESL Investments, Inc.
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.
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 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.
“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.”
The Chapter 11 process will give Sears 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.
“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.
Sears Holdings intends to reorganize around a smaller store platform of EBITDA-positive stores. The company believes that a successful reorganization will save the company and the jobs of tens of thousands of store associates.
The company will 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.
Leadership and Board Changes
Holdings has enacted a series of leadership and board changes in support of the continued transformation and restructuring process:
- CEO Transition: Edward S. Lampert has stepped down from his role as CEO, effective immediately. He will remain chairman of the board.
- Formation of Restructuring Committee: The board has formed a special committee that will oversee the restructuring process and have decision making authority with respect to transactions involving affiliated parties. The Restructuring Committee consists solely of independent directors and includes Alan J. Carr, Paul G. DePodesta, Ann N. Reese and William L. Transier.
- Appointment of Chief Restructuring Officer: Mohsin Y. Meghji, managing partner of M-III Partners, has been appointed chief restructuring officer.
- Addition of New Independent Director: William L. Transier, chief executive officer of Transier Advisors LLC, has joined Holdings’ Board as an independent director. The appointment follows the recent addition of Alan J. Carr to the board.
Additional Information about the Restructuring Process
Additional information is available on the company’s restructuring website at restructuring.searsholdings.com. For court filings and other documents related to the court-supervised process, please visit http://restructuring.primeclerk.com/sears, call (844) 384-4460 and +1 (929) 955-2419, or email firstname.lastname@example.org.
SOURCE: Sears news release