Sears Holdings shares lost almost a third of their value in early trading on Wednesday after a report said that the beleaguered retailer had hired advisers to prepare for a bankruptcy filing ahead of a debt payment deadline.
The company has hired advisory firm M-III Partners LLC to prepare the bankruptcy filing, although the retailer is continuing to consider other options to avoid insolvency, the report said.
A Sears special committee is weighing a prior offer from Lampert to acquire the retailer's Kenmore appliances brand and its home services business for as much as $480 million. CNN reported that while that sell-off represented only 8 percent of the investor's holdings, he could be cutting his losses since "shareholders are typically wiped out in bankruptcy". CEO and primary shareholder Eddie Lampert told the company's board that it was crucial it restructure more than $5 billion it owes "without delay", according to a recent regulatory filing. Lampert is the company's biggest shareholder.
Shares of real estate investment trusts (REIT) exposed to Sears properties also fell Wednesday.
The company separately said it named restructuring expert Alan Carr to its board of directors. Brand added that he had significantly cut down on his Sears bond holdings earlier this year amid concerns from his clients.
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Sears mentioned those constraints as part of a proposal it offered to sell real estate to help pay down borrowings, which would cut debt by almost 80 percent. CNBC earlier reported that the company was arranging a bankruptcy loan, known as debtor-in-possession financing.
But the retail landscape is littered with out-of-business brands that tried to reorganize in the bankruptcy process and liquidated their businesses instead. But its declines goes back decades, well before the growth of online shopping that threatens traditional brick-and-mortar retailers.
He writes that Sears occupies a significant amount of space, but that about three-quarters of its stores are outside the U.S.'s Top 50 markets, so while many landlords rent space to the retailer, that exposure is relatively small.
In July, Sears closed its last store in Chicago, once its hometown.
If Sears were to file for bankruptcy, its financial performance during the upcoming holiday season could prove crucial in determining its future, according to the sources. That's down from 317,000 USA employees in early 2006, soon after the merger. Toys "R" Us' creditors lost faith in the retailer after revenue during last year's holiday season failed to meet their expectations.