Sears Holdings Corp. said Monday that the company and certain of its subsidiaries have filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. The company noted that it will also close 142 unprofitable stores near the end of the year. Edward Lampert has stepped down from his role as Chief Executive Officer of the Company, effective immediately. He will remain Chairman of the Board.

The company said it expects to move through the restructuring process as expeditiously as possible and is committed to pursuing a plan of reorganization in the very near term as it continues negotiations with major stakeholders started prior to today's announcement.

The company noted that it has received commitments for 300 million dollars in senior priming debtor-in-possession or "DIP" financing from its senior secured asset-based revolving lenders and is negotiating a 300 million dollars subordinated DIP financing with ESL Investments, Inc.

ESL is the Company's largest stockholder and creditor, and Edward Lampert is ESL's Chairman and Chief Executive Officer. Subject to Court approval, the DIP financing is expected to improve the Company's financial position immediately and support its operations during the financial restructuring process.

142 unprofitable Sear's locations to close near the holidays

The company said it intends to continue payment of employee wages and benefits, honor member programs and pay vendors and suppliers in the ordinary course for all goods and services provided on or after the filing date.

Sears said, "The Company's Sears and Kmart stores, and its online and mobile platforms, are open and continue to offer a full range of products and services to members and customers. Holdings' services and brand businesses will also continue to operate as usual. Customers should expect Holdings' loyalty programs, including the Shop Your Way membership program, and the Sears and private label credit card rewards programs, to continue as normal."

"While we have made progress, the plan has yet to deliver the results we have desired, and addressing the Company's immediate liquidity needs has impacted our efforts to become a profitable and more competitive retailer. The Chapter 11 process will give Holdings the flexibility to strengthen its balance sheet, enabling the Company to accelerate its strategic transformation, continue right sizing its operating model, and return to profitability....," said Edward S. Lampert, Chairman of Sears Holdings.

The company noted that it will also close 142 unprofitable stores near the end of the year. Liquidation sales at these stores are expected to begin shortly. This is in addition to the previously announced closure of 46 unprofitable stores that is expected to be completed by November 2018.

Edward Lampert has stepped down from his role as Chief Executive Officer of the Company, effective immediately. He will remain Chairman of the Board. The Company's Board has created an Office of the Chief Executive Officer, which will be responsible for managing the Company's day-to-day operations during this process. The Office of the CEO will be composed of Robert A. Riecker, Chief Financial Officer; Leena Munjal, Chief Digital Officer, Customer Experience and Integrated Retail; and Gregory Ladley, President of Apparel and Footwear.

The Board has formed a special committee that will oversee the restructuring process and have decision making authority with respect to transactions involving affiliated parties. The Restructuring Committee consists solely of independent directors and includes Alan J. Carr, Paul G. DePodesta, Ann N. Reese and William L. Transier.

Mohsin Meghji, Managing Partner of M-III Partners, has been appointed Chief Restructuring Officer.

William Transier, Chief Executive Officer of Transier Advisors LLC, has joined Holdings' Board as an independent director. In addition to his leadership roles at public companies, Transier has extensive restructuring experience involving companies with complex capital structures and has served on special committees of independent directors responsible for overseeing restructuring processes. This appointment follows the recent addition of Alan J. Carr to the Board.

Separately, ESL said it consistently believed that restructuring the company's finances as a going concern and outside a court-run bankruptcy process would have been a better path for Sears. To that end, ESL put forward proposals in April and August to acquire certain Sears assets, followed by a comprehensive proposal in September for liability management transactions, strategic asset sales and real estate transactions. All the proposals had the goal of providing liquidity and runway for a transformation.

ESL said, "While a comprehensive out-of-court resolution was ESL's preferred approach, it did not prove possible to achieve this outside the framework of a Chapter 11 process. ESL believes that supervision by a judge will enable creditors to address any issue among them according to a clear set of rules and permit the sale of certain assets through a court-approved auction process to maximize value." (dpa)

photo: Sears Facebook-Page