Sears Holdings – News Report Indicate that Edward Lampert’s ESL Has Tabled Last Minute $4.4bn Bid for Sears Holdings

December 28, 2018 – Edward Lampert’s ESL, Investment, Inc. (“ESL”) reportedly submitted an offer for a substantial portion of the Debtors’ assets just moments in advance of an impending Court deadline. As first reported by CNBC, the $4.4bn offer, made through ESL affiliate Transform Holdings, Inc., is for 425 of Sears’ stores and is supported by a $1.3bn financing commitment from investment banks.  News outlets had reported earlier in the day that ESL was expected to ask for an extension to the 4pm bid deadline as it scrambled to secure financing for its offer. As of the morning of November 29th, neither the Debtors nor ESL had filed documentation with the bankruptcy Court or the SEC in respect of ESL’s bid.

Widely circulated news reports quote an un-named ESL spokesperson as stating, “[The bid] reflects our firm belief that there is a future for Sears as a smaller, less indebted retailer….Factoring for all considerations, we believe that our going concern bid provides the best path forward for the company, the best option to save tens of thousands of jobs and is superior for all of Sears’ stakeholders to the alternative of a complete liquidation.” The spokesperson continued, “Should our bid be accepted and succeed, we expect that the company that emerges from bankruptcy would offer employment to up to 50,000 associates, depending on any further actions the company may take between now and closing, and reinstate severance protections for eligible employees who accept their employment offer.”

The Wall Street Journal is reporting that (i) the $1.3bn financing commitment is from three financial institutions and that the banks, including Bank of America and Citigroup, have agreed to extend the maturity on $1bn of debt and (ii) that ESL has agreed to forgive or extend maturities on most of the Sears debt that it holds. The WSJ is also reporting that as part of the financing package, ESL and Cyrus Capital Partners LP will provide the Debtors with approximately $200 million in new financing to be backed by Sears properties.

Reuters reported that the third bank is the Royal Bank of Canada (not previously a lender) and that the three banks have together agreed to provide a $950 million asset-based loan and a $350 million revolving credit line. Reuters further reported that the ESL bid also includes about $400 million in financing from non-bank lenders.

Whats Next?

ESL will be obligated to file an amendment to its Schedule 13D with the SEC within two business days. Further to its announcement regarding a prospective $4.6bn bid made on December 5, 2018, ESL updated its Schedule 13D on December 6th. The Debtors are also likely to shortly provide further detail via the SEC and the Court hearing its bankruptcy case. 

On November 19, 2018, the Court approved “off-the-shelf” bidding procedures for “Go Forward Stores” [Docket No. 816] that established the December 28 bid deadline and which anticipates an auction date of January 14, 2109. The Debtors are also obligated to notify ESL, as well as any other bidders, as to whether a bid has “qualified” by January 4, 2018. In respect of further bids, the WSJ has reported that liquidation firms Tiger Capital Group LLC and Great American Group LLC have teamed up to place a liquidation bid; likewise Gordon Brothers Retail Partners LLC and Hilco Global Merchant Resources LLC have teamed up for a bid.  Significantly, all four liquidation firms teamed up to liquidate all Toys “R” Us Inc. stores in the U.S. earlier this year.

The Court order provides the following schedule: