Forty additional Sears stores are set to close in February 2019.

The situation at cash-strapped Sears Holdings Corp. remains fluid, but sources following the situation expect the company to file for Chapter 11 bankruptcy protection ahead of a $134 million debt payment, due Monday.

One credit analyst said Sears would likely keep about 300 stores open so it can capture holiday sales. The analyst noted Sears has been cash-flow-positive during the six-week holiday selling period in the past and that it makes sense for the retailer to try to capture as much cash as it can for the debtor’s estate. The retailer operated 866 stores under the Sears and Kmart nameplates as of the end of August.

James Schaye, chief executive officer and partner at asset disposition firm Eaton Hudson Inc., said, “They will get more money and a better recovery selling through the holiday season than if the case went directly into a liquidation through the appointment of a trustee in a Chapter 7 case.”

Sources describe the conversations with lenders as still “challenging,” but said Sears should be able to secure debtor-in-possession financing, likely up to $500 million.

A filing is expected over the weekend or early Monday, although it could take longer to dot all the i’s and cross all the t’s. One individual familiar with the talks said, “There is a lot of pressure to put this into bankruptcy sooner than later.”

A Sears spokesman did not immediately respond to a request for comment Friday.

Some believe there’s pressure for lenders to provide debtor-in-possession financing because Sears needs inventory for holiday sales. One industry executive said, “They are now scrambling to do that. One option is to have augmented inventory.”

Schaye explained that “augmented inventory” usually means liquidation firms bring in additional inventory to help broaden the merchandise mix and give consumers a reason to shop at Sears.

The speculation in the marketplace on Friday was that Sears would file for a Chapter 11 bankruptcy to reorganize, but switch to a liquidation. Sources told WWD that even if Sears chairman Edward S. Lampert, as chairman of hedge fund ESL Investments, is interested in buying some of Sears’ remaining assets, he likely would have a hard time lining up financing to do so.

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