Banks, Lampert Going After What's Left of Sears

To no one’s great surprise, Sears Holdings Corp. (NASDAQ: SHLD) CEO Edward Lampert and his ESL Investment firm, has re-invigorated his offer to buy the company’s Kenmore appliance brand and a piece of the home services business in an effort to provide the company with enough funds to pay its immediate bills and stave off bankruptcy, at least for the weekend.

Lampert offered to buy the assets for $480 million several weeks ago but a special committee of the Sears board has not accepted the offer. According to sources cited by Reuters, Lampert is also “mulling” the purchase of these assets through a bankruptcy option as part of a non-judicial rescue plan.

At the same time, at least two of Sears’ biggest lenders, Bank of America and Wells Fargo, are pushing for a debtor-in-possession package that would supply Sears with just enough cash to close all its stores and sell all the inventory according to a report in The Wall Street Journal. The two banks are first in line to be paid from proceeds of a liquidation sale. The banks are the principal lenders on a  $1.5 billion asset-backed line of credit that is secured by store inventory, credit-card, and pharmacy receivables. Sears reported total debt of some $5 billion as of August 4.

Reuters has also reported today that Sears has begun missing payments to suppliers, another sign that perhaps a bankruptcy filing is on its way within days.

Lampert’s rescue plan is not acceptable to the banks, aware that Lampert wants to get his hands on Sears’ remaining assets as cheaply as he can. A bankruptcy auction is not the best way to do that.

Neither Lampert nor the banks are willing to put up more money for Sears to pay off a $134 million in debt that comes due Monday. So one or the other or some combination of the competing plans is nearly certain to be the solution.

Either way, the remaining 866 Sears and Kmart stores appear headed for closure and the 90,000 Sears employees are very likely to be out of a job just in time for the holidays.

Sears stock traded down nearly 19% Thursday afternoon at around $0.40 after closing Wednesday at about $0.49. The 52-week range is $0.35 to $6.35.

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