Sears

Amid Sears Holdings Corp.’s request to sell certain debt instruments, there are liquidation rumblings connected with the bankruptcy case.

The bankrupt retailer is seeking court approval to sell corporate debt in the range of nearly $1 billion in loans held by different Sears units. It’s a move to raise cash for the financially strapped retailer. The company is also past due in its quest for additional financing. When the company filed its voluntary Chapter 11 bankruptcy petition on Oct. 15, Sears noted it was in talks with ESL Investments for an additional $300 million for a junior debtor-in-financing package. Then came word that ESL didn’t want to foot the entire financing and was looking for investors. A hearing on the planned junior DIP facility was postponed.

It wasn’t even clear in the beginning whether Sears could have filed a Chapter 11 petition. It had a hard time getting lenders on board as they were pushing the retailer to liquidate. In the end, they agreed to provide an incremental $300 million for the senior debtor-in-possession facility to at least fund the initial stages of the bankruptcy. But time and cash burn aren’t helping.

Court papers said Sears has a monthly cash-burn rate of $125 million. And now the unsecured creditors committee seems to be pushing for a liquidation. It filed an objection to Sears’ motion for court approval of procedures for how it will market a sale of the company.

Essentially, their concern is that the time and money spent in trying to sell the company as a going concern of 400 stores — about a three- to four-month process and between $375 million to $500 million to keep the retailer in operations, according to court papers — may come at an enormous cost to them. The committee said in the legal document that it has been unable to answer whether a Going Concern Sale would maximize value to creditors, when compared with a near term Going Out of Business process. It did say it is “unconvinced” that a Going Concern sale would be prudent use of Sears’ dwindling resources. The committee further called the plan to sell the company “wishful thinking.” It also referred to the idea of the sale as maximizing value as a “foolhardy gamble with other people’s money.”

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