With a $134 million debt payment due Monday, it’s unclear whether Sears Holdings Corp. will be able to avoid a trip to bankruptcy court.
Citing people familiar with the situation, The Wall Street Journal reported Tuesday night that employees of M-III Partners, a New York-based advisory firm, have spent weeks working on a potential bankruptcy filing that could come as soon as this week, though Sears is considering other options and could decide not to seek bankruptcy protection. Earlier Tuesday, Sears, which has lost $11 billion since 2011, announced it has added a restructuring expert to its board.
Sears’ stock price sank 30 percent Thursday to close at less than 34 cents a share.
Sears and M-III Partners did not respond to requests for comment.
Just three weeks ago, Sears CEO Edward Lampert pushed a plan to stave off bankruptcy, calling for restructuring $1 billion in debt and selling off about $1.5 billion in real estate and $1.75 billion in other assets. The proposal from Lampert’s hedge fund warned that the retailer, which also owns Kmart, needed to act “immediately” to buy time for its turnaround.
But efforts to turn around the money-losing retailer have been going on for years.
Lampert, whose hedge fund has loaned Sears $1.6 billion over the past 2 ½ years, “has been very, very good at keeping the company going,” said James Schrager, clinical professor of entrepreneurship and strategy at the University of Chicago’s Booth School of Business. “At some point, when you’re losing the kind of money they’ve been losing, you just can’t keep it going.”
Even if Sears finds the funds to make Monday’s debt payment, “I think it’s just a matter of time” before the company is forced to restructure, Edward Jones analyst Matt Kopsky said.