According to the news report by Reuters, Sears Holdings Corp. has agreed to reconsider a revised takeover bid from Chairman Eddie Lampert. By doing so, the 126-year-old company has temporarily averted the liquidation process that would have meant its end.
Lampert’s previous offer of $4.4 billion to rescue Sears fell short and the representatives of the company began preparations to liquidate its holdings before the scheduled bankruptcy court hearing on Tuesday.
The Sears’ attorney, Ray Schrock of Weil, Gotshal & Manges LLP, told US Bankruptcy Judge Robert Drain that Lampert was expected to make a revised offer, along with a deposit of $120 million, by 4pm, Eastern Time, on Wednesday.
Schrock did not give any further details about the revised offer. All he said was that this new offer came about after many days of continuous negotiations.
Judge Drain stated that Lampert’s new offer would be assessed by Sears against a proposed liquidation offer that will be made during the scheduled January 14 auction. However, the judge stated, if Lampert’s offer falls short of the liquidation offer one more time, then he will forfeit over $17 million from the deposit he has made to the company’s creditors.
Drain stated during Tuesday’s hearing that Sears was a large company and what happened to it affected a lot of people. He said that a revised bid from Lampert was a positive development that could let Sears continue to survive – at least in part.
While this gives the company and Lampert some breathing space, the Chairman’s new offer needs to be better than the previous one, which looked at keeping 425 of Sears’ top stores open and preserving up to 50,000 jobs.
However, there are still numerous hurdles that need to be cleared before any offer can save the company. Having said that, the agreement to reconsider Lampert’s new offer has temporarily shelved the controversies that pushed the retail chain giant to the brink of closure.
In his previous bid, Lampert had asked for a legal release that would protect him from litigation over deals he had conducted with Sears before the company filed for bankruptcy.
As of Monday, unsecured creditors were not willing to grant him that release, since they wanted to investigate some of those deals. The reason why they are suspicious is because it was those transactions that turned Lampert into the retail giant’s biggest creditor as well as largest stakeholder.
Lampert had also asked for $1.3 billion worth of debt be forgiven in exchange for ownership of the restructured Sears. This move is known as a credit bid in bankruptcy parlance. It is also a move that drew objection from the company’s other creditors.
Other concerns that creditors had with Lampert’s previous offer was the question of whether the Chairman’s bid covered the costs associated with bankruptcy proceedings that the company had incurred. These costs, which include lawyers’ and financial advisors’ fees, is expected to be upwards of $200 million.
If Lampert is successful with his revised bid for Sears, then this issue of forgiving his debt will be assessed by Judge Drain after the January 14 auction. At this time, unsecured creditors, made up of Sears’ bondholders and landlords, feel that they would achieve better financial recovery if the company is liquidated.
A decade of continuous declines is what finally led Sears to bankruptcy. Lampert had promised to restore the retail giant to its former glory. He supported the company by buying a large part of its stock and even lent it money.
Unfortunately, critics feel that it was Lampert himself who let the company decline.