Sears Appears on the Verge of Bankruptcy
Update (10/11, 9:30am): According to a Wall Street Journal report published this morning, Sears Holdings Corp. met with its lenders in an emergency meeting on Wednesday night to discuss financing for the retailer. People familiar with that meeting said that the company's major lenders were pushing the embattled retailer to liquidate its assets under a Chapter 7 bankruptcy filing rather than the Chapter 11 restructuring route that it was said to be considering.
The rush to get the financing for a bankruptcy filing in order is due to a $134 million debt repayment that is due this Monday. The WSJ sources did say that the situation is "fluid" and that the company could still find another source of funding to potentially prop it up through a restructuring. That source, though, won't be CEO Eddie Lampert's hedge fund, which has been Sears' major source of cashflow through its struggles. Though Lampert has made offers to buy off pieces of the slumping retailer's business, sources familiar with his thinking have said that he doesn't plan to lend the company money in order to make Monday's payment.
The Wednesday night meeting eventually broke with the company and its lenders at a stalemate over how to proceed. Beyond the debt repayment, Sears reportedly faces a several-hundred-million-dollar shortfall as the company needs to stock its remaining Sears and Kmart stores for the holidays. Given its precarious position, many vendors now require Sears to pay for inventory upfront and in cash.