Sears Holdings Likely Heading to Liquidation

A Sears store

Sears Holdings Corp agreed on Tuesday to consider a revised takeover bid from Chairman Edward Lampert, temporarily staving off a liquidation that would have spelled the end of the 126-year-old USA department store operator. It included $1.3 billion in financing and was for 425 Sears and Kmart stores, a little more than half the number of stores Sears had when it filed for bankruptcy this fall.

Retail expert Burt Flickinger discusses how Sears Chairman Eddie Lampert is trying to buy the company out of bankruptcy.

U.S. Bankruptcy Court Judge Robert Drain on Tuesday said other parties can submit additional or improved bids before the Monday auction and that Sears will be obligated to consider all its options. If the court sides with Sears, the company will go ahead with a scheduled auction of company assets January 14.

Sears' lawyers said a revised bid will require Mr Lampert to make a $120m (£94.4m) down payment, through his hedge fund, by 4pm NY time on Wednesday.

Sears was down almost 94% in the past year.

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It's not the first frenzied deal Sears has made during its bankruptcy.

The deal was reached after days of "virtually round-the-clock negotiations", Sears attorney Ray Schrock told the court. Under changes in the bid reached in negotiations, he will have until Wednesday afternoon to make a $120 million cash payment.

Lampert's offer did not include putting up cash to back the credit bid. Were Sears to liquidate its assets, it would become one of the most high-profile victims in the wave of bankruptcies that has swept the retail sector in the last few years, as the explosion in online shopping exacerbates the fierce price competition facing brick-and-mortar stores. It also sought a release from any liability related to transactions between the hedge fund and the retailer prior to Sears' bankruptcy filing.

"I remember at the beginning of summer, we'd start flipping through the catalog, having to get the penny loafers of the Mary Janes, the black and white shoes", she said.

The bankruptcy judge overseeing the case said that means Lampert's use of a credit bid has not been pre-approved. Without an agreement, Sears faced the possibility of liquidation.

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