Sears Gets a Second Chance: Ex-CEO Eddie Lampart Wins Bankruptcy Sale
After ESL Investments won the bankruptcy auction last month, Judge Robert Drain approved the deal to save Sears Holdings in shrunken form. All major remaining assets will be sold to ESL Investments, the hedge fund of its chairman, largest shareholder, and former CEO Eddie Lampart.
But don’t breathe a sigh of relief yet.
Store closures are not expected to stop altogether. In fact, ESL President Kunal Kamlani testified Wednesday that about 156 of the remaining 425 Sears locations are not performing well.
Employees are urging Lampart to invest in the stores to ensure they will not have to go through this again.
"I'm relieved I still have a job, but the future of my family is back in the hands of Eddie Lampert, who has proven he only cares about his own wealth and does not care about our families and our livelihoods," said Victor Urquidez, assistant manager at Sears Auto Center. “He needs to make sure that all employees who dedicated years to the company and whose jobs he destroyed get financial support for themselves and their families.”
If not for the sale to ESL, Sears would have probably had to liquidate it stores completely.
The department store has been experiencing falling numbers for roughly 15 years. It has since closed some 350,000 locations and cut about 250,000 jobs. Sears eventually succumbed to filing Chapter 11 bankruptcy this past October.
According to Greg Portell, partner and retail adviser at consultancy A.T. Kearney, Sears has about 200 stores that may potentially be successful, but only if they can get smaller.
"We intend for the new company to operate as many Sears and Kmart stores as reasonably possible, including new smaller stores that emphasize our stronger capabilities. Continuing to operate a meaningful network of stores is essential to achieving our goal of returning Sears to profitability," ESL said in a statement earlier this week.
Under the new deal, ESL would offer $5.2 billon including an $855 million cash payment. In addition, it will assume $1.3 billion of liabilities including customers’ warranties and paying off $621 million of senior debt. The new deal also does not protect Sears from further cuts.
As far as whether or not they will be able to survive long term still remains vastly unknown. One thing that is for sure is that Sears has a laundry list of changes that need to be made, and the road ahead is sure to be a bumpy one.