BY Fraser Tennant
In a further body blow to the US retail industry, Sears Holdings Corporation has filed for Chapter 11 bankruptcy protection – yet another retail giant struggling with mounting debt and the increasing shift in consumer behaviour toward shopping online.
Through the Chapter 11 process, Sears – which also owns Kmart – and certain of its subsidiaries are seeking to establish a sustainable capital structure, continue streamlining its operating model and grow profitably for the long term. The company listed more than $10bn in debts and more than $1bn in assets in its filing.
The company hopes to move through the restructuring process as smoothly and expeditiously as possible, and is committed to pursuing a plan of reorganisation as it continues negotiations with major stakeholders.
“The Chapter 11 process will give Sears the flexibility to strengthen its balance sheet, enabling the company to accelerate its strategic transformation, continue right sizing its operating model and return to profitability,” said Edward S. Lampert, chairman of Sears Holdings. “Our goal is to achieve a comprehensive restructuring as efficiently as possible, working closely with our creditors and other debtholders, and be better positioned to execute on our strategy and key priorities."
To this end, Sears intends to continue paying employee wages and benefits, honour member programmes, and pay vendors and suppliers in the ordinary course for all goods and services provided on or after the Chapter 11 filing date.
"Over the last several years, we have worked hard to transform our business and unlock the value of our assets," said Mr Lampert. "While we have made progress, the plan has yet to deliver the results we have desired, and addressing the company's immediate liquidity needs has impacted our efforts to become a profitable and more competitive retailer.”
Sears has received commitments for $300m in senior priming debtor-in-possession (DIP) financing from its senior secured asset-based revolving lenders, and is negotiating a $300m subordinated DIP financing with ESL Investments, Inc – its largest stockholder and creditor.
Subject to court approval, the DIP financing is expected to improve Sears’ financial position immediately and support its operations during the financial restructuring process.
Mr Lampert concluded: "As we look toward the holiday season, Sears and Kmart stores remain open for business and our dedicated associates look forward to serving our members and customers. We thank our vendors for their continuing support through the upcoming season and beyond.”