Sears Holdings Corporation announced a series of actions to position the company to establish a sustainable capital structure, continue streamlining its operating model and grow profitably for the long term.
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To facilitate these actions, the company and certain of its subsidiaries have filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York.
The company expects to move through the restructuring process as expeditiously as possible and is committed to pursuing a plan of reorganization in the very near term as it continues negotiations with major stakeholders started prior to today's announcement.
Holdings has received commitments for $300 million in senior priming debtor-in-possession ("DIP") financing from its senior secured asset-based revolving lenders and is negotiating a $300 million subordinated DIP financing with ESL Investments.
ESL is the company's largest stockholder and creditor, and Edward S. Lampert is ESL's Chairman and Chief Executive Officer. Subject to Court approval, the DIP financing is expected to improve the company's financial position immediately and support its operations during the financial restructuring process.
Holdings has filed a number of customary motions with the Court seeking authorization to support its operations during the restructuring process and ensure a smooth transition into Chapter 11.
The company intends to continue payment of employee wages and benefits, honor member programs, and pay vendors and suppliers in the ordinary course for all goods and services provided on or after the filing date.
Holdings intends to reorganize around a smaller store platform of EBITDA-positive stores.
The company believes that a successful reorganization will save the company and the jobs of tens of thousands of store associates.
Holdings is currently in discussions with ESL regarding a stalking-horse bid for the purchase of a large portion of the company's store base.
There can be no assurance that any transaction will be consummated or on what terms any transaction may occur. Additionally, Holdings expects to market and sell certain of the company's assets over the coming months.
Holdings will also close 142 unprofitable stores near the end of the year. Liquidation sales at these stores are expected to begin shortly. This is in addition to the previously announced closure of 46 unprofitable stores that is expected to be completed by November 2018.
Edward S. Lampert has stepped down from his role as Chief Executive Officer and will remain Chairman of the Board. The company's Board has created an Office of the CEO, which will be responsible for managing the company's day-to-day operations during this process. The Office of the CEO will be composed of Robert A. Riecker, Chief Financial Officer; Leena Munjal, Chief Digital Officer, Customer Experience and Integrated Retail; and Gregory Ladley, President of Apparel and Footwear. ■