In the early morning hours of October 15, 2018, Sears Holding Corp. and various related entities filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York after failing to make a $134 Million payment.
Sears Robuck and Co. is one of America’s most iconic retailers, founded in the late 1800s. In its early years, Sears, through its mail-order catalog, serviced customers in remote areas, bringing them access to a variety of products, ranging from housewares to kits to build homes. Later, in the 1920s and 1930s, Sears opened brick and mortar stores in urban areas, allowing customers to browse products in person. Sears grew to become one of the largest retailers in the United States. However, Sears’s sales have been on the decline since the 1990s. In 2004, Sears merged with Kmart Holdings Corporation in an effort to diversify its business. Recently, to increase cash flow, Sears sold its Lands’ End clothing brand and its Craftsman tool brand. However, those sales were not enough to sustain operations long term.
Currently, Sears operates 687 stores across the United States. Sears listed approximately $6.9 billion in assets and approximately $11.3 billion in liabilities in its bankruptcy documents. As of the current time, most stores remain open, and Sears is continuing to pay its approximately 68,000 employees’ wages and benefits.
The bankruptcy was filed because Sears lacks sufficient liquidity to continue ongoing operations. To fund its operations, Sears has received $300 million in a financing package from existing lenders and is soliciting another junior loan in the amount of $300 Million. Sears believes that this financing will solve its current liquidity issues.
At the present time, Sears plans to close 142 stores by the end of this year, in addition to the 46 stores that were already slated to close by the end of November. Sears is hopeful that it will emerge from bankruptcy with a smaller footprint of profitable stores. Sears is also considering selling its most profitable stores.
As of the current time, Sears will continue to accept gift cards and Sears credit cards and will also continue to honor its return policies unless an item was purchased at a going out of business sale, in which case those sales are considered final.
To learn more about the Sears bankruptcy or for any bankruptcy-related questions, please contact Crystal H. Thornton-Illar. Crystal is a Partner in Leech Tishman’s Pittsburgh office and practices in the firm’s Bankruptcy & Creditors’ Rights Practice Group. She can be reached at 412.261.1600 or cthornton-illar@leechtishman.com.
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Leech Tishman Fuscaldo & Lampl is a full-service law firm dedicated to assisting individuals, businesses, and institutions. Leech Tishman offers legal services in alternative dispute resolution, aviation & aerospace, bankruptcy & creditors’ rights, construction, corporate, employee benefits, employment, energy, environmental, estates & trusts, family law, government relations, immigration, insurance coverage & corporate risk mitigation, intellectual property, internal investigations, international legal matters, litigation, real estate, and taxation. Headquartered in Pittsburgh, PA, Leech Tishman also has offices in Chicago, Los Angeles, New York, Sarasota and Wilmington, DE.