Sears avoids bankruptcy
Sears Holdings chair Edward Lampert’s US$5.2 billion bid to save 425 Sears and Kmart stores and roughly 45,000 jobs from liquidation was approved by a US bankruptcy court judge last week.
Lampert’s bid, which he made through his hedge fund ESL Investments Inc., was approved by Judge Robert Drain after a hearing spanning several days in a White Plains, NY, federal bankruptcy court.
Terms of the sale allow for some litigation to continue against Lampert and ESL.
According to Reuters, Drain said that Lampert, the only bidder offering to keep Sears alive, had been subjected to substantial verbal abuse during the proceedings, with critics characterising the Sears chairman’s plan a scheme to rob the company and its creditors of assets.
“He is a wealthy individual and a big boy and I guess he can take it,” Drain said, adding that some of the abuse may have been justified.
As CEO and chairman, Lampert’s time at Sears led to cost-cutting efforts that had resulted in a decline in sales, store closures, and inventory reductions.
He arranged the US$11 billion merger between Sears and discounter Kmart in 2005 and tried for years to boost business.
The company’s restructuring officer Mohsin Meghji and company directors Bill Transier and Alan Carr were among those questioned on the witness stand during the court hearing on Lampert’s offer.
Lampert, who stepped down as CEO when the department store chain filed for bankruptcy in October last year, remained the retailer’s chairman, largest shareholder and creditor. A restructuring committee of independent directors negotiated with Lampert and his advisers.
Lampert’s offer, which had been rejected more than once, came after the retailer had been pushed to the brink of liquidation multiple times. In the end, he increased his initial offer by $800 million, largely in the assumption of Sears’ bills for taxes and merchandise.
Reuters reported that Drain grew impatient as the proceedings wore on Thursday, when a creditor’s committee lawyer argued an objection to the takeover bid.
It added money owed to lawyers, bankers and other advisers working on the retailer’s bankruptcy case also proved contentious as Sears lacked enough money to meet all its obligations.
The report added Lampert still remains exposed to lawsuits related to certain transactions he engaged in while leading Sears before filing for bankruptcy.
This story first appeared on our sister site Inside Retail Australia.