Sears Preparing To File Bankruptcy As Soon As This Week
Desperate to avoid losing control of the company which he bought out of bankruptcy in 2005, Lampert - who in 2003 was kidnapped from the parking lot of his Greenwich office, but was able to persuade his captors to let him go after two days of captivity - has also sought advice, or perhaps magic, from distressed consulting firm AlixPartners, lawyers at Weil, Gotshal and Lazard, as he has tried to keep the company afloat and restructure out of bankruptcy court.
Another hint that a bankruptcy now appears inevitable is that on Tuesday, Sears added restructuring expert Alan Carr as a director, expanding the six-person board to seven.
Carr runs a restructuring advisory firm and previously worked as a restructuring lawyer at Skadden, Arps, Slate, Meagher & Flom LLP. He has also served on the board of companies—including wireless-networking business LightSquared Inc. and guitar maker Gibson Brands Inc.—that have recently navigated the bankruptcy process.
As the WSJ puts it, Lampert, who was "once hailed as a genius investor for smart bets he made on AutoZone and AutoNation," met his match in Sears, Roebuck. The retailer was struggling before he combined it with Kmart, which he rescued from bankruptcy, to create Sears Holdings Corp. in 2005.
While Lampert rushed to cut expenses and close unprofitable stores, the business continued to deteriorate during the recession following the financial crisis, as more purchases were made online and rivals such as Walmart and Amazon grew stronger. Not helping was Lampert’s unconventional approach to retailing: he resisted investing in store upgrades and after becoming CEO in 2013, managed the company from Florida.
According to the WSJ, Lampert wants to restructure Sears without filing for bankruptcy protection, because he views bankruptcy as risky for retailers who often enter Chapter 11 bankruptcy with the hope of restructuring but wind up in Chapter 7 liquidation instead, as was the case this year with Toys “R” Us Inc. More realistically, Lampert does not want cede equity control to the company's creditors, which would be the most likely outcome in court.
Lampert, whose hedge fund ESL Investments Inc. owns a majority of Sears shares, also believes the company can get more value for its assets by selling them while it is a going concern, this person added.