October 15, 2018
Early this morning, Illinois-based Sears Holdings Corporation ($SHLD) and approximately 49 affiliated entities (including KMart) finally filed for chapter 11 bankruptcy. The company lists a staggering $11.339 billion of total debts and $6.937 billion of assets.
The well-known company has 866 full-line and specialty stores as of August 4, 2018. In its chapter 11 petition, it boasts of its legacy as an “integrated retailer with significant physical and tangible assets, as well as virtual capabilities enabled through technology.” Yes, you read that correctly: they actually say “virtual capabilities enabled through technology.” That right there may help inform EVERYONE why this storied retailer has found its way into bankruptcy court. To the last, Sears stands out for its ability to appear out of touch.
The company appears to have a commitment for a $1.875 billion debtor-in-possession (“DIP”) asset-backed credit facility, including an increase of $300mm from its existing facility as well as an agreement over the use of the company’s lenders’ cash collateral. According to a company press release, the company is also negotiating an additional $300mm commitment from ESL Investments Inc. (“ESL”), the company’s largest shareholder and the investment vehicle of Eddie Lampert. The company intends to reorganize around a smaller store platform of “EBITDA-positive stores.” To this end, the company will close 142 stores near the end of the year adding to the previously announced 46 stores set to close in November 2018 — potentially further perpetuating the hurt put on U.S.-based malls over the last several years. Meanwhile, the company continues to negotiate an asset purchase agreement with ESL for “a large portion of the Company’s store base.” This would, obviously, keep the enterprise from liquidating and potentially help maintain thousands of jobs: Sears currently employs approximately 90k people.
While Eddie Lampert will remain Chairman of the Board, he has resigned as CEO of the company. Godspeed, Eddie.
The company’s top listed creditors at the time of filing include The Pension Benefit Guaranty Corporation and various trustees under five different tranches of unsecured notes totaling over $3 billion in principal amount (BNY Midwest Trust Company, Computershare Trust Company NA, The Chase Manhattan Bank NA). Trade creditors include Whirlpool Corporation ($23.4mm), Frigidaire Company ($18.6mm), and Winia Daewoo Electronics America ($15.2mm).
We will update this post on Wednesday in our next briefing; we are particularly excited to see how the company spins the “factors” that led to its appearance in bankruptcy court. Here’s one explanation:
And here’s another — seemingly more-on-point — one:
Jurisdiction: S.D.N.Y. (Judge Drain)
Capital Structure: $11.339b debt
Legal: Weil, Gotshal & Manges LLP (Ray Schrock, Garrett Fail, Jacqueline Marcus, Sunny Singh)
CRO/Financial Advisor: M-III Partners, LP (Mohsin Meghji, Colin Adams, Brian Griffith, Christopher Good, Mary Korycki, Kevin Tanaka, Enrique Acevedo, Wesley Sima, Noah Zatzkin, Joseph Frantz, Nicholas Weber, Ravi Ramnani )
Investment Banker: Lazard Freres & Company
Restructuring Committee’s Independent Directors: William Transier, Alan Carr, Paul DePodesta, Ann Reese
Restructuring Sub-Committee (RSC): Alan Carr and William Transier
Legal to RSC: Paul Weiss Rifkind Wharton & Garrison LLP (Paul Basta, Kelley Cornish, Lewis Clayton, Susanna Buergel, Robert Britton, Jonathan Hurwitz, Emma Carlson, Teresa Lii)
Financial Advisors to RSC: Alvarez & Marsal North America LLC (Dennis Stogsdill, Nick Grossi, Brian Corio, Jonah Galaz, Andrew Gasbarra, Jonathan Bain, Jordan Kravette)
Investment Banker to RSC: Evercore Group LLC (Daniel Aronson, Jeremy Matican, Guy McCumber, Siddhesh Patkar, Jonathan Kamel, Ajith Sukumar)
Conflicts Counsel: Young Conaway Stargatt & Taylor LLP (Pauline Morgan, Rolin Bissell, Ryan Bartley, Travis Buchanan)
Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
Other Parties in Interest:
Large Shareholders: ESL Investments. Legal: Cleary Gottlieb Steen & Hamilton LLP (James Bromley, Sean O’Neal, Andrew Weaver)
Prepetition RCF, Term Loans, FILO & DIP ABL Agent: Bank of America NA. Legal: Skadden Arps Slate Meagher & Flom LLP (Paul Leake, Shana Elberg, George Howard)
Citibank NA. Legal: Davis Polk & Wardwell LLP (Marshall Huebner, Eli Vonnegut)
Large Shareholder: Fairholme Capital Management LLC. Legal: Sullivan & Cromwell LLP (Andrew Dietderich, Brian Glueckstein, David Zylberberg)
PBGC. Legal: Locke Lord LLP (David Wirt)
Debtors’ IP/Ground Lease Term Loan Lender: SHLD Lendco LLC. Legal: Cahill Gordon & Reindel LLP (Joel Levitin, Richard Stieglitz Jr.)
Official Committee of Unsecured Creditors
Legal: Akin Gump Strauss Hauer & Feld LLP (Ira Dizengoff, Philip Dublin, Abid Quereshi, SARA Brauner)
Legal (Conflicts): Herrick Feinstein LLP (Sean O’Donnell, Stephen Selbst, Steven Smith)
Financial Advisor: FTI Consulting Inc. (Matt Diaz, Conor Tully, Michael Berkin, Marshal Eisler, Kenny O’Trakoun, Morgan McCaskey, Samuel Star)
Investment Banker: Houlihan Lokey (Saul Burian, Eric Siegert, Brad Geer, Surbhi Gupta, Greg Rinsky, Tom Hedus, Ross Rosenstein, Ryan Conroy, John Hartigan, Ahmed Mumtaz, Jack Foster, James Lai, Natalie Weelborg, Andrew Felman, Matthew Stadtmauer)
Cyrus Capital Partners LP
Legal: Milbank Tweed Hadley & McCloy LLP (Eric Reimer, Thomas Kreller, Craig Price)
Indenture Trustee to Medium Term Notes: The Bank of New York Mellon Trust Company, N.A.
Legal: Carter Ledyard & Milburn LLP (James Gadsden, Leonardo Trivigno)
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