Bloomberg reports that hedge funder Eddie Lampert, the former CEO and current chairman of Sears Holdings, has offered to buy the company out of bankruptcy for $4.6 billion.
Lampert is Sear’s biggest shareholder and already its biggest creditor, through a series of loans it has made to keep the company alive and functioning over the years. Bloomberg writes that Lampert’s new bid is contingent on ESL Investments - Lampert’s hedge fund - “being released from liability related to any of its prebankruptcy transactions, according to the filing.”
His new bid “could include a mix of cash, equity loans and debt swaps. Lampert would take over the whole company, rather than just buying selected stores as originally planned, and preserve about 50,000 jobs, according to the documents” as reported by Bloomberg. The story notes that “the new bid is designed to head off outright liquidation of Sears. The company has struggled to get support from lenders and suppliers who aren’t sure the iconic retailer can survive, and Lampert’s new bid may not quell those doubts.”
However, the story also notes that this may be more an effort to preserve equity than save the company, quoting Burt Flickinger, managing director of Strategic Resource Group, as saying that “the deal would hand Lampert more money and professional fees while the equity holders and lenders would see their investments evaporate. ‘The longer Lampert stays, the more Sears and Kmart’s combined viability is impaired,’ Flickinger said. ‘He’s trying to perpetuate himself almost as an undertaker to drain more blood out of the body and make more money as he’s doing it’.”
Lampert is Sear’s biggest shareholder and already its biggest creditor, through a series of loans it has made to keep the company alive and functioning over the years. Bloomberg writes that Lampert’s new bid is contingent on ESL Investments - Lampert’s hedge fund - “being released from liability related to any of its prebankruptcy transactions, according to the filing.”
His new bid “could include a mix of cash, equity loans and debt swaps. Lampert would take over the whole company, rather than just buying selected stores as originally planned, and preserve about 50,000 jobs, according to the documents” as reported by Bloomberg. The story notes that “the new bid is designed to head off outright liquidation of Sears. The company has struggled to get support from lenders and suppliers who aren’t sure the iconic retailer can survive, and Lampert’s new bid may not quell those doubts.”
However, the story also notes that this may be more an effort to preserve equity than save the company, quoting Burt Flickinger, managing director of Strategic Resource Group, as saying that “the deal would hand Lampert more money and professional fees while the equity holders and lenders would see their investments evaporate. ‘The longer Lampert stays, the more Sears and Kmart’s combined viability is impaired,’ Flickinger said. ‘He’s trying to perpetuate himself almost as an undertaker to drain more blood out of the body and make more money as he’s doing it’.”
- KC's View:
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First of all, I totally believe what Burt Flickinger says. I almost always do, and this is no different.
It is hard for me to imagine any end game in which Sears - outmoded, obsolete, myopic, isolated and largely mismanaged almost from the moment Lampert invested in the company - can survive except over the short-term as Lampert sucks whatever blood he can get out of it.
Know who I really pity? Whatever company is his next victim, once Lampert has drained Sears of all life, cast aside the carcass, and looks around for someplace else to invest.
