A Sears Bankruptcy May Be Imminent

AFTER 125 YEARS OF operation, Sears Holdings Corp (Nasdaq: SHLD) may finally be throwing in the towel. CNBC is reporting that sources familiar with the matter say Sears is in talks to secure bankruptcy financing, an eventuality that most Wall Street analysts have seen coming for years.

Sears stock fell 30 percent to about 41 cents per share. At its 2007 peak, SHLD traded at more than $144 per share.

Sears has a $134 million debt payment due next week which it has previously said it will be unable to make. According to sources, the company is now in talks with banks to obtain a “debtor-in-possession” loan, which can be used to keep the company running throughout a bankruptcy proceeding.

At this point, it seems Sears investors’ last hope is that CEO Eddie Lampert can once again pull a rabbit out of a hat and come up with some form of short-term financing that can keep Sears afloat long enough to demonstrate that his restructuring plan for the company is viable. Lampert has already acquired $2.4 billion of Sears debt via his hedge fund ESL. Lampert has been criticized by some investors and analysts for exploiting Sears situation. Lampert currently owns about 31 percent of Sears, and ESL owns another 19 percent. Susquehanna estimates ESL earns roughly $200 million per year in interest payments from Sears.

Sears hasn’t turned a profit since 2010 but has been aggressively closing stores and selling assets to try to find a way to stay viable. Unfortunately, even after slashing its total Sears and Kmart store count from more than 3,300 in 2006 to less than 900 today, Sears still reported another 3.9 percent decline in same-store sales and a net loss of $508 million in the most recent quarter.

At the time, Lambert said he was still committed to the company’s turnaround plan, which includes closing another 46 stores in the fourth quarter. Unfortunately, Sears may have finally run out of time to prove it can be profitable.

“The company is looking for ways to increase liquidity, but that continues to be challenging,” Moody’s analyst Christina Boni said last month. “Albeit they’ve had…

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