Lampert boosts Sears bid to over $5B

Katherine Doherty and Josh Saul
Bloomberg News
Eddie Lampert’s ESL Investments hedge fund raised its bid to keep Sears Holdings Corp. in business with an offer of about $5 billion that covers severance for workers and bills from its suppliers.

Eddie Lampert’s ESL Investments submitted an improved offer to keep Sears Holdings Corp. in business that totals more than $5 billion.

The new bid, about $600 million more than Lampert previously offered, should satisfy conditions set in U.S. bankruptcy court on Tuesday after his earlier plan was rejected, ESL said Thursday in a regulatory filing. The terms include up to $166 million to cover payments to suppliers, up to $139 million of bankruptcy-related expenses and as much as $43 million of additional severance for employees. ESL said it also wants to take additional assets beyond the original proposal.

Lampert and his ESL Investments hedge fund faced a court deadline yesterday to come up with a better plan. The Sears chairman and former chief executive officer was told to put up $120 million if he wants to take part in an auction against other bidders who would liquidate the company. He also faced pressure to cover costs that have been incurred by suppliers and advisers since the company filed for bankruptcy in October.

If his new bid passes muster with creditors and the court, Lampert can compete in the auction scheduled for next week. He’ll be able to use debt he controls as currency to pay for Sears, a process known as credit bidding, a Sears lawyer has said in court, but the company will reserve the right to review that offer and compare its value with others.

“We believe our proposal will provide substantially more value to stakeholders than any other option, in particular a liquidation, and is the best path forward for Sears, its associates and the many communities across the United States touched by Sears and Kmart stores,” ESL said in an emailed statement.

Lampert’s ESL says in the latest offer it will pay as much as $135 million of property taxes for locations acquired in the bid. The plan also proposes to acquire additional assets including about 57 properties, as well as accounts receivables and additional inventory. The terms still would include releasing Lampert and ESL from claims tied to bailout transactions before the bankruptcy, which some creditors contend unfairly benefited ESL.

Sears is teetering on the edge of liquidation after the rejection of a previous offer from Lampert, whose hedge fund ranks as Sears’s biggest shareholder and creditor. Lampert initially made a $4.4 billion bid to take over selected stores and keep the chain open, but he’s been unable so far to convince some of the other creditors that he could ever make Sears profitable again.

Some creditors have concluded that they can recover more of their investment if the stores and other assets are auctioned off. U.S. bankruptcy court Judge Robert Drain reminded the Sears lawyers at a hearing this week that the company has an obligation to review all its options, not just the offer from Lampert.

One obstacle could be the official committee of unsecured creditors, who said in court they will continue to challenge the legitimacy of the liens underpinning the debt ESL holds. This could hobble Lampert’s bid, which depends partly on exchanging debt for control of the company.