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Sears

Eddie Lampert’s $5.2 Billion Sears Takeover Is ‘Opportunity Not to Be a Cartoon Character,’ Says Judge

By
Grace Dobush
Grace Dobush
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By
Grace Dobush
Grace Dobush
Down Arrow Button Icon
February 8, 2019, 6:03 AM ET

A bankruptcy Judge approved Eddie Lampert’s $5.2 billion takeover bid for Sears (SHLD) Thursday, but not before leaving the hedge fund manager with some choice words.

Lampert’s fund, ESL Investments, intends to keep 425 Sears and Kmart stores open, saving the jobs of 45,000 employees — a move that Judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York described as credible.

Yet the matter didn’t end there: although Lampert was not in attendance — CNBC reports that he dialed in from his office in Florida — Judge Drain addressed him directly in his closing statement, saying that the reclusive billionaire “has the opportunity not to be a cartoon character … he should do that.”

Referring to the verbal abuse Lampert took during the trial, The Wall Street Journal reports that Drain added, “He is a wealthy individual and a big boy, and I guess he can take it.”

Sears and ESL Investments are still working out the final details of the plan, such as which side would be responsible for $166 million owed to vendors, the New York Times reports, but lawyers said they were hoping to close the deal Friday.

Sears plans to run just 425 smaller stores focused on selling its most popular products like appliances and mattresses, rather than the roughly 700 stores that were open when it filed for bankruptcy in October, CNBC reports. Sears and Kmart have been struggling since their merger in 2005, and the company has not turned a profit since 2010.

A competing bid by Abacus Advisory Group LLC, made on behalf of most Sears creditors and landlords, had intended to shut down and liquidate the company. While Lampert — the company’s CEO from 2013 to 2018 and its largest shareholder since 2005 — plans to keep it running, it may well turn out that more stores have to close before Sears can emerge from bankruptcy.

Facing $10 billion in debt, the Illinois-based department store chain filed for bankruptcy protection in October and closed dozens of underperforming stores. Sears, which has been a cornerstone of the U.S. retail market since 1886, had been hoping for some relief over the holidays. But the retailer lost $318 million in November and December and reported $2 billion in sales for November and December, less than half what it reported for the first calendar quarter of 2018.

Sears’ unsecured creditors and the federal watchdog Pension Benefit Guaranty Corp. have opposed Lampert’s bid to buy the company. The creditors claim Lampert and ESL used stock buybacks, spinoffs and dividends to rake in billions of dollars while stripping the company of assets and cash, WSJ reports. PBGC believe the two pension funds for 90,000 Sears retirees and beneficiaries are underfunded by $1.4 billion.

The retailer’s bankruptcy lawyer said Thursday that PBGC had resolved its $1.7 billion claim against the company and would back Lampert’s proposal, WSJ reports. The government pension insurer is taking over the company’s underfunded pension plans.

In the hearing, the creditors’ committee won an important concession, the New York Times says: It can still file lawsuits against Lampert for past deals that spun off real estate and other assets to companies that his hedge fund had stakes in.

 

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