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Long Beach Sears and Kmart fate lies in Bankruptcy Auction on Monday
The fate of the Long Beach Sears
and Kmart stores and properties will play out in a high finance drama in New
York City starting on Monday January 14,
2019.
Sears Holdings Corp. Chairman
Eddie Lampert's more than $5 billion bid to take over the remaining 425 stores that are still open will
face off against any other proposals to liquidate the remaining assets of the
once iconic retailer.
By all news accounts, most of
Sears current creditors are skeptical of Lambert's bid through his hedge-fund
company ESL.
Since the October 2018 Sears
Holding Company bankruptcy filing, Lampert has been working to save the
remaining Sears/Kmart stores and assets and 68,000 remaining jobs.
But some of Sears’ creditors are
skeptical of ESL, and it’s not yet known how the hedge fund’s proposal stacks
up against other offers for the company’s assets through liquidation.
Aside from the store properties
and inventory, other assets include Sears Home Services business and brands
like Kenmore and DieHard. Sears’ intellectual property assets could also be
bought by a company that could bring the brand back online or in brick-and-mortar
stores.
As a back-up plan, ESL also has
reported that it would bid on some pieces of the Sears business individually.
Last week, the Sears Holding
Board of Directors signaled they would reject Lampert's original bid of $4.3 billion
for the Friday January 11th deadline for an outright sale.
On Thursday January 10th, Sears
Chairman put up a required $120 million on Wednesday January 9, 2019 he needed
to post in advance to qualify for Monday's auction.
Also on Thursday January 10th,
Lampert increased his bid to $5 billion. That new offer also takes on roughly $166 million
in payment obligations to vendors and gives an additional $43 million to severance
costs. Lampert's ESL hedge fund will also assume $135 million in
tax bills for properties that Lampert hopes to acquire as part of his bid and pick
up tax and supplier bills that Sears incurred during bankruptcy proceedings.
Two of those properties are the 4th
District's Los Altos Center Sears and the 5th District's Los Altos Gateway Kmart.
Sears creditors oppose Lampert’s plan because it includes a bankruptcy move
called a “credit bid.” . The credit bid
in his $5 billion offer is to forgive the $1.3 billion of Sears debt his ESL company
holds and use that "credit" as part of the currency for his offer.
Last week the Sears Board allowed
the Lampert bid to proceed, but the U.S. Bankruptcy Judge Robert Drain who is
overseeing the case will have to make a ruling if the credit bid will be
allowed. Drain has stated that the laws
favor bids that save jobs, which Lampert's bid appears to do.
In the timeline filed with the court, Sears will notify the
Bankruptcy Court of the auction results by Wednesday January 16, 2019. Those unhappy with the action results have
eight days to challenge the outcome in court. Ultimately Judge Robert Drain has
to approve the sale of Sears’ assets.