Sat, Feb 09, 2019 - Page 5 News List

Judge approves US$5.2bn plan to save Sears

TOUGH COMPETITION:The ruling means about 425 stores and 45,000 jobs would be saved, but questions about Sears’ long-term survival remain

AP, NEW YORK

A worker removes sale banners inside a closed Sears department store in Nanuet, New York, on Jan. 7, one day after Sears Holding Corp closed multiple stores across the nation.

Photo: Reuters

A bankruptcy judge on Thursday blessed a US$5.2 billion plan by Sears Holdings Corp chairman and biggest shareholder to keep the iconic business going.

The approval means about 425 stores and 45,000 jobs would be preserved.

Eddie Lampert’s bid through an affiliate of his ESL hedge fund overcame opposition from a group of unsecured creditors, including mall owners and suppliers, that tried to block the sale and pushed hard for the company’s liquidation.

In delivering his decision, US bankruptcy Judge Robert Drain for the Southern District of New York rejected the group’s claims that the sale process was unfair and flawed, that it shut out any others who could have been interested in buying the business and that Sears had more value to its creditors if it died than if it lived.

However, the ghost of Toys ‘R’ Us loomed large in the Sears bankruptcy case. The toy retailer was forced into liquidation last year — just months after it tried to reorganize under bankruptcy court, wiping out 30,000 jobs.

During the hearing, which started on Monday, Drain focused on the specter of jobs and put the lawyers representing the creditors’ group on the defense.

Lawyers for Sears and ESL argued that the sale offered the best alternative and also played up the need to save jobs.

Drain was expected to enter his order yesterday, making it official.

Even with this latest reprieve, Sears’ long-term survival remains an open question.

ESL president Kunal Kamlani shared his vision this week of building a network of smaller stores that highlights mattresses and major appliances, but the details are still lacking.

William Transier, an independent board member of Sears since October last year, acknowledged during the hearing that Sears could shutter an average of three stores per month and sell US$600 million in real estate over the next three years.

Moreover, the company, whose stores look old and drab, faces cutthroat competition from Amazon.com Inc, Target Corp and Walmart Inc.

“Major hurdles to its long-term business remain,” Moody’s department store analyst Christina Boni wrote in a note published on Thursday.

“Scale, which is critical to competing in retail today, will be lacking and its core customer proposition still remains in question,” she wrote.

Lampert, who merged Sears and Kmart in 2005, steered Sears into Chapter 11 bankruptcy protection in October. The company’s corporate parent, which also owns Kmart, had 687 stores and 68,000 employees at the time of the filing. At its peak in 2012, its stores numbered 4,000.

Sears was hard hit during the recession and was unable in its aftermath to keep up with shifting consumer trends and strong rivals. It has not had a profitable year since 2010 and has suffered 11 straight years of declining sales.

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