Sears is closing 80 more stores, including five Kmarts in California, as it nears a deadline that could determine whether the bankrupt retailer lands a lifeline to save its business or is forced to begin shutting down.
Sears Holdings Corp. said it notified workers at the closing Sears and Kmarts on Thursday. In California, no additional Sears stores are slated for closure. The five Kmart stores are in Burbank, Apple Valley, Santa Maria and Stockton.
Sears, based in Hoffman Estates, Ill., already had announced plans to shutter 182 stores after seeking Chapter 11 bankruptcy protection in October. The latest round of stores will close in March and liquidation sales are expected to begin in two weeks, Sears said Friday.
News of the closures came hours ahead of a deadline for parties interested in acquiring the retailer’s assets to submit bids, according to a timeline approved by the Bankruptcy Court.
Earlier this month, ESL, the hedge fund run by Sears Chairman Edward Lampert, said it would offer about $4.6 billion for many of the retailer’s remaining assets, including about 500 Sears and Kmart stores and its well-known Kenmore and DieHard brands.
That proposal would keep Sears in business and preserve “tens of thousands of jobs,” Lampert’s hedge fund said in a letter to Sears’ investment banker earlier this month.
ESL made its offer late Friday, according to multiple media reports, all citing unnamed people familiar with the matter.
ESL’s brinksmanship “suggests lenders are … skittish about whether it really is viable as a going concern,” said Craig Barbarosh, a partner at law firm Katten Muchin Rosenman who is not involved with the Sears case.
Sears told the court it has seen interest from multiple parties, including some who would liquidate the company, according to a CNN report.
The company and its restructuring adviser declined to comment Friday on any bids it may have received.
Sears could choose to extend the deadline it set to give potential bidders more time to finalize plans or secure financing.
Even if ESL does submit a formal offer to buy the business with the intent of keeping it in operation, it doesn’t guarantee Sears would escape liquidation.
The court will choose the bid that recovers as much of the money Sears owes its lenders and vendors as possible, whether that means shutting the business down immediately or giving Sears more time to restructure, Barbarosh said.
If it’s a close call, judges tend to lean to bids that would keep the business going because that preserves jobs, said Barbarosh. ESL said it expected to employ 50,000 at the 500 stores it proposed acquiring, out of 68,000 employees Sears said it had at the time of its bankruptcy filing.
A bid that would keep Sears in business also gives lenders who aren’t first in line to be repaid a shot at retrieving a larger portion of what they’re owed.
“But if lenders can make an argument that there will be greater returns (from shutting down quickly), I would not be surprised if they liquidate,” Barbarosh said.
At the time of its bankruptcy filing, Sears said it had 687 stores and 68,000 employees, 32,000 of whom are full-time.
Zumbach writes for the Chicago Tribune.