Sears was lucky to receive the green light on a $5.2 billion plan, proposed by Sears chairman and biggest shareholder, Eddie Lampert. This restructuring plan is meant to give Sears a second chance on life and hopefully keep the historical, retail business alive and kicking. Experienced bankruptcy lawyers agree this is a bold plan to save the struggling company.
The approval is not just a joyful moment for Eddie Lampert; the survival of the Sears empire means that approximately 425 stores and 45,000 jobs will be kept secure, moving forward.
Bankruptcy Judge Approves Plan Amid Opposition
Eddie Lampert’s bid (through an affiliate of his ESL hedge fund) overcame great opposition from Sears’ unsecured creditors, which included mall owners and goods suppliers who had fought hard to push for the company’s liquidation (so they could be paid!)
However, when U.S. Bankruptcy Judge Robert Drain for the Southern District of New York rejected the group’s claims, he stated that the sales process they had proposed was unfair and flawed, and it shut out other people/companies who might have been interested in buying Sears.
This is not the first of major retailers to suffer bankruptcy woes. Another big-name, recent case was that of the toy giant Toys R Us. The nostalgic toy retailer was forced into liquidation last year, months after its failed attempts to reorganize under bankruptcy court. Over 30,000 jobs were lost as a result of Toys R Us closing its doors. RIP Geoffrey the Giraffe.
Back in Judge Robert Drain’s courtroom, Drain focused on the jobs that would be lost if Sears closed its doors. He also placed the lawyers representing the creditors’ group on the defense, which doesn’t always happen in these cases.
An Uncertain Future Remains
Despite all of this “good news” for Sears, the company’s long-term survival remains murky, at best. With the rise of online retailers washing over consumers – as well as the iconic imagery of Sears waning with younger generations – Sears has a lot of image/strategic restructuring to do before a bright future is ensured.
Kunal Kamlani, president of ESL, voiced his ideas for Sears’ future. He believes that building a network of smaller stores highlighting specific product lines such as mattresses and appliances is a solid strategy, though details of his plan remain unclear.
An independent Sears’ board member, William Transier, shared during the hearing that Sears could shut three stores per month and sell $600 million in real estate over the next three years if needed. As well, Sears faces grave competition from big box stores such as Target and Walmart (not to mention online tycoon: Amazon.)
Sears was hit very hard during the recession and, in the aftermath, was unable to keep up with evolving consumer trends. The company has not had a profitable year since 2010.
Eddie Lampert personally owns 31 percent of the Sears’ outstanding stock. His hedge fund has an 18.5 percent stake in the company, as per FactSet. Lampert stepped down as CEO in October of last year. One of the lawyers for his hedge fund said the 56-year-old billionaire (Lampert) has been portrayed as a mix between J. Gould – the late railroad tycoon – and Barney Fife – a fictional character on “The Andy Griffin Show.” Even the bankruptcy judge said that Lampert has been subject to much verbal abuse. Though judge Drain also reported, “He is a wealthy individual and a bit boy, and I guess he can take it.”