Breaking News
Investing Pro 0
Cyber Monday Deal: Up to 55% off CLAIM SALE

Sears picks liquidator should rescue talks fall through: sources

Published Jan 06, 2019 09:34PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: The Sears, Roebuck and Company logo is seen outside a store in Brooklyn, New York
 
SHLDQ
+0.00%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DBI
+2.65%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
AEO
+4.35%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Jessica DiNapoli and Mike Spector

(Reuters) - A long-standing liquidator is now first in line for one of the U.S. retail sector's most daunting assignments: shutting down 126-year-old department store chain Sears Holdings Corp (PK:SHLDQ), people familiar with the matter said on Sunday.

Sears has lined up Closter, New Jersey-based Abacus Advisory Group LLC to sell the chain's vast inventories of tools, appliances and store fixtures should negotiations with Chairman Edward Lampert over his $4.4 billion takeover bid end unsuccessfully, the sources said.

Lampert's bid to rescue Sears through an affiliate of his hedge fund, ESL Investments Inc, has fallen short so far, the sources said. The billionaire and Sears are racing to resolve the bid's sticking points before a Tuesday court date after negotiations dragged well beyond a Friday deadline, the sources said.

The bid would preserve 425 Sears stores and up to 50,000 jobs across the United States, according to a letter delivered to Sears on Dec. 28. A liquidation would put roughly 68,000 people Sears now employs out of work.

Besides tapping Abacus, Sears has turned to a firm run by retail magnate Jay Schottenstein to help it shed inventory in the event of a liquidation, the sources said. Schottenstein is the chief executive of teen apparel chain American Eagle Outfitters Inc (N:AEO) and chairman of shoe seller DSW Inc (N:DSW).

The sources asked not to be identified because the matter is confidential. Sears and Alan Cohen, chairman of Abacus, declined to comment. Schottenstein could not be immediately reached for comment.

Abacus has a 16-year history with Sears, after liquidating more than 800 stores for the once-mighty chain since 2002, according to bankruptcy court papers. Sears had already retained Abacus as a liquidation consultant after filing for bankruptcy, but decided to take offers from other liquidators.

Sears decided to continue working with Abacus last Friday after turning down bids from competitors that have worked on some of the biggest wind-downs in recent years, including Bon-Ton Stores Inc, Toys "R" Us Inc and Sears Canada, the sources said.

Abacus has worked on several liquidations, including Filene's Basement and Service Merchandise Corp, according to its website.

ADMINISTRATIVE CLAIMS

A main point of contention in the negotiations between Lampert and Sears on Sunday centered on whether Lampert's bid adequately addressed so-called administrative claims, the legal term of art for the bankruptcy costs Sears has racked up since filing for bankruptcy protection on Oct. 15, some of the sources said.

Those costs, which include bills from lawyers and financial advisers, are expected to exceed $200 million, those sources said.

Under one scenario being discussed, Lampert would agree to cover the shortfall if Sears cannot fully pay those bills, these sources said.

Lampert's bid also proposes forgiving $1.3 billion of debt he holds in exchange for ownership of the reconstituted Sears, a bankruptcy maneuver known as a credit bid. In addition, Lampert wants a release from legal exposure related to a series of transactions he engaged in with the retailer before it filed for bankruptcy protection. Those made him the company's biggest creditor, in addition to its largest shareholder.

Lampert's offer did not include putting up cash to back the credit bid. That has raised concerns in the negotiations since there remains a chance that the maneuver might not be allowed in court given ongoing investigations of Lampert's pre-bankruptcy deals, which the hedge fund manager maintains were proper, the sources said.

Lampert's takeover bid is not likely to go forward absent settling the concerns related to the proposed credit bid and legal release, one of the sources said.

Unsecured creditors have pushed for Sears to liquidate, partially because they contend they will realize a better financial recovery if it does. Those creditors, which include Sears landlords and bondholders, have also questioned Lampert's pre-bankruptcy transactions with the retailer.

Sears picks liquidator should rescue talks fall through: sources
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email