Kmart chairman Edward Lampert listens during a news conference to announce the merger of Kmart and Sears in New York . Kmart is acquiring Sears, one of the most venerable names in U.S. retailing, in a surprise $11 billion deal that will create the nation's third-largest retailerKMART SEARS MERGER, NEW YORK, USA

It looks like it’s the easy way or the hard way for Sears Holding Corp.

Edward S. Lampert, chairman, chief executive officer and the company’s largest shareholder, unveiled a plan Monday to eliminate $4.35 billion of the company’s debt load — and dangled the possibility of a bankruptcy as soon as next month if it’s not accepted.

The proposal from Lampert’s ESL Investments lays out what’s at stake in stark terms, noting “it is in the best interests of all stakeholders to accomplish this as a growing concern, rather than alternatives that would substantially reduce, if not completely eliminate, value for stakeholders.”

The carrot is a long-dreamed to pivot that would make Sears a much smaller, more profitable company with much less debt. The stick is bankruptcy.

Lampert, the architect of the 2004 deal that brought Sears and Kmart together and set the retailer on a disastrous path, has repeatedly pumped more money into Sears as it danced on the edge, but the $134 million in debt coming due Oct. 15 might be the breaking point.

That debt is just the tip of the iceberg of money owed by the company, which has been burning cash for years and losing share to just about all of its competitors.

Lampert’s plan includes $1.75 billion in asset sales, $1.47 billion in real estate transactions and $1.12 billion debt conversion that would see creditors become stockholders. It would cut Sears’ debt load to $1.24 billion from $5.59 billion.

Lampert has been pushing for the company to sell assets such as Sears home improvement and services business and Kenmore this year and offered himself up as a buyer.

But the plan, revealed in a Securities and Exchange Commission filing, is more comprehensive and could represent a final push, particularly with a liquidity crisis looming. (Sears has been facing heavy debt loads for years, but has always found some way to make payments or seen Lampert step in to loan the firm money, extending his own financial position at the company.)

“ESL’s goal is to enable Sears Holdings to return to profitability, for the benefit of Sears and all of its stakeholders,” according to the investment firm’s pitch to the firm’s board. “For this to occur, Sears must act immediately to have sufficient runway to continue its transformation.

“To obtain this runway, Sears must extend near-term debt maturities, reduce its long-term debt and eliminate the associated cash interest obligations,” the proposal said. “Sears can derive more value for all of its stakeholders by entering into liability management transactions and strategic asset sales than would be available by pursuing alternative options to address its liquidity challenges.”

Sears’ board directed management to “work closely with ESL, its advisers and the company’s other stakeholders to seek to pursue liability management transactions of the nature described in the proposal, subject to advice of the company’s legal and financial advisers and approval…of the board.”

“The board has referred the proposed real estate transactions outlined in the proposal to the special committee of the board,” so it can be evaluated independent of Lampert.

The statement suggests the process could move quickly, with both sides pushing forward and facing a deadline in both weeks.

But the company said there could be no assurances that a deal will be reached.

Sears has already made significant changes, closing stores, spinning off real estate and the Lands’ End business and selling off major brands, including Craftsman. It has also sought to be more digital and operate with a membership model. (While all of those paths have been pursued, critics of Lampert’s approach have argued that the company needs to investor more in it stores to create a better, or at least acceptable, experience for shoppers.)

What ever it is that’s required to fix Sears, there is clearly more work to be done.

The company has logged net losses of $6.78 billion over the past five years, as sales fell to $16.7 billion from $36.19 billion in 2013.

“It’s going to be difficult to save Sears,” said consultant Craig Johnson, president Customer Growth Partners. “If [Lampert] wanted to save Sears, he should have done it five years ago when there was enough to save. They had the golden calf and they started to sell different pieces off. If they were really going to try to save Sears the retailer, they needed to do something very substantial a number of years ago.

“They may save Sears the landlord or the property developer, it does have assets there,” Johnson said.

While Lampert gets lots of flack for Sears’ performance, the company has been on a downward path for some time. Johnson said department stores in general control about 1.4 percent of the market today, down from 10 percent a generation ago — and that Sears has been the biggest share donor of all.

“In the Fifties, Sears stood like a Colossus across the retail landscape, bigger than the next four companies,” Johnson said.

Now it is much diminished and controlled almost entirely by Lampert, who controls 73.9 percent of the company’s stock.

But while Lampert was pushing his plan, the other shareholders seemed skeptical — although they are perhaps more resigned to the long-awaited endgame at Sears.

Shares of the firm slipped 2.4 percent, or 3 cents, to $1.24 Monday — leaving it with a market capitalization of just $135 million.

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