Sears, lenders that are approaching a greater financing agreement without Lampert
Sears, lenders that are approaching a greater financing agreement without Lampert
is completing an expanded bankruptcy financing package that will keep it afloat beyond the holiday season, as it seeks to sell its most profitable stores and other assets.
At the time of retail sale October 15 bankruptcy filing, a group of banks formed by Bank of America N.A., Wells Fargo & Co. and Citibank N.A. They agreed to contribute $ 300 million in financing. President and former CEO Edward Lampert, through his hedge fund ESL Investments, was in negotiations with other lenders to grant an additional $ 300 million junior loan.
Now, the structure has changed. According to people familiar with the situation, Mr. Lampert's ESL is no longer expected to participate in the financing. Junior lenders consisting of hedge funds and private equity firms, including Cyrus Capital Partners L.P., would provide $ 450 million, and banks would reduce their position to $ 150 million, bringing the new total to $ 600 million, according to people.
Previous court documents show that Cyrus was already discussing the bankruptcy loan at the time of Chapter 11 filing.
While the company and the lenders are approaching an agreement, the discussions are fluid and may change by the end of this week, the people said.
Mr. Lampert is now focused on putting together a so-called stalking offer for up to 500 Sears stores and other assets, including the Kenmore brand, one of the people said. The proposal, which would be subject to higher and better offers, would probably consist of cash and the forgiveness of some of the $ 2.6 billion in debt that ESL owns, the person said.
Sears has said in court documents that approximately 400 profitable stores it will be the focal point of the sale process, but other assets could be part of the sale.
Before filing for bankruptcy of Sears, The Wall Street Journal reported bank lenders took a tougher stance and were only willing to provide bankruptcy financing that would allow Sears to sell inventory and close all its stores. There have also been more discussions with banks. about future store closings, said two of the people.
Sears is closing 142 unprofitable stores by the end of the year, in addition to 46 stores that are expected to close at the end of November. Currently, the company operates 687 Sears and Kmart stores. It employs about 68,000 people.
During a recent court hearing, a Sears attorney said the company's advisors In negotiations on financing. and they were still reaching potential lenders to participate in the loan. In addition, the lawyer said that different funding structures were being considered.
A hearing to approve the financing is scheduled for November 15. During the same hearing, Sears will seek approval to move forward with a sales schedule that would make an auction in January.
Court documents must show that the sale must be closed by February 8 to comply with the sales schedule established by some of your bank lenders.
Reuters previously reported the new financing package.
Write to Lillian rizzo in Lillian.Rizzo@wsj.com and Suzanne Kapner in Suzanne.Kapner@wsj.com
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