Wall Street apparently thinks the end is near for Sears. The stock price for Sears Holdings, owner of retail store brands Sears and Kmart, fell significantly on news that the CEO and largest shareholder Eddie Lampert will not lend the company any more money. Sears faces a key $134-million debt payment on Monday that Lampert has refused to fund from his hedge fund ESL Investments Inc. unless a special committee formed by the Sears Board of Directors accepts a rescue plan presented by Lampert. The committee has declined to do so amid concerns over a backlash from other Sears creditors and shareholders, leaving bankruptcy as the company’s only option. Sears Holdings met with its lenders Wednesday night but did not reach an agreement that would keep Sears operating, one of the persons involved told The Wall Street Journal.
Rather than restructure the business, Sears may liquidate its assets in a chapter 7 bankruptcy filing, a plan supported by major lenders, including Bank of America Corp., Wells Fargo & Co. and Citigroup Inc., according to The Wall Street Journal. The other option is a chapter 11 bankruptcy filing, which would allow Sears to cut debt and close more stores in an attempt to possibly survive as a smaller, profitable company.
For landlords, a Sears bankruptcy and liquidation is a mixed blessing. For owners of Sears stores in desirable locations, landlords such as Simon Property Group, Macerich and General Growth Properties will have an opportunity to redevelop the Sears buildings for new tenants willing to pay much higher rents. But for owners of malls in secondary and tertiary locations with weak retail tenant demand, the stores may sit vacant for a long time.