Sold to the highest — and only — bidder.
Billionaire Edward S. Lampert and his hedge fund ESL Investments have been successful in their $5.2 billion bid to purchase the major remaining assets of Sears Holdings Corp., meaning a total of 425 stores Sears and Kmart stores will remain open, while 45,000 jobs will be saved.
After a three-day hearing in a bankruptcy court in White Plains, N.Y., where attorneys representing Lampert vied against disgruntled, lower-ranking creditors, Judge Robert Drain ruled in favor of the former. The deal is expected to close Friday.
“I’ll grant the motion,” said Drain following a lengthy speech. “I believe the proposed order needs some work…but that work is relatively modest and it would appear to me I should be in a position to enter it tomorrow morning.”
He went on to remark that during the course of this case Lampert had been subject to substantial verbal abuse, which may or may not be justified, and that he now has the opportunity to take action that would in fact be “of great meaning” to the debtors.
The businessman and his hedge fund were given a big helping hand in court Thursday when they gained some crucial support in the form of the U.S. Federal pension insurer.
The Pension Benefit Guaranty Corp., charged with protecting the retirement incomes of American workers, recently took over two underfunded pension plans for 90,000 Sears retirees as well as the plan’s assets, and at the time opposed the sale to Lampert.
But Sears’ lawyer Ray Schrock told Judge Drain that the PBGC had had a change of heart and had in fact agreed to a settlement, under which the agency will withdraw its objection to the proposed sale of Sears’ assets to ESL.
“This settlement proposal is really phenomenal. We have come to an arrangement here the PGBC will withdraw their objections to the ESL sale,” Schrock said.
The settlement, which still needs court approval, details that the PBGC would receive $800 million from the bankruptcy estate, less than half the $1.7 billion of underfunding it had been demanding Sears cover.
Lampert’s bid was initially approved by the insolvent retailer in January. The move was seen as a way for Sears to protect roughly 45,000 jobs.
But creditors countered, saying Lampert and ESL were only acting in their own best interests and asked the courts to order immediate liquidation. They pointed out that Lampert’s business plan would involve closing more stores — and additional job losses.
The department store, which had roughly 3,770 stores and more than 300,000 employees at its peak in 2006, had dwindled to just under 700 stores and around 69,000 employees when it filed for Chapter 11 bankruptcy Oct. 15. Since then the footprint has shrunk to about 425 stores. Revenues have fallen too, from $53 billion in 2006 to just $16.7 billion in 2018.
During his closing remarks, Schrock said: “Today is obviously a very important day. There have been many of those in the short course of this case, but this in fact may be the most important day. Everything depends on it. The fate of Sears in going to be in the court’s hands. We have done everything we can to save this company over the last several months.”
Having won the day, Lampert now has his work cut out for him.
“Although the plan to reorganize around a much smaller store base has been approved, major hurdles to its long-term business remain,” said Christina Boni, department store analyst at Moody’s Investors Service. “Scale, which is a critical to competing in retail today, will be lacking and its core customer proposition still remains in question. Further shrinking of the store base and cost reductions may be required as profitability remains elusive.”