Facing what he called “significant near-term liquidity constraints” that includes a debt payment in the middle of October, Sears CEO Edward Lampert is proposing a plan to restructure and reduce the company’s debt.
According to a filing with the Securities and Exchange Commission, ESL Investments, a hedge fund owned by Lampert, is proposing a 78% reduction in Sears current debt to approximately $1.2 billion, an 80% reduction of annual interest payments and lowering maturing debut obligations through 2020.
In addition, the ESL proposal includes asset sales of $1.75 billion, which includes the Kenmore brand, Sears Home Improvement business (SHIP) and the PartsDirect business of the Sears Home Services division, along with real estate transactions totaling $1.47 billion.
“ESL’s goal is to enable Sears Holdings to return to profitability, for the benefit of Sears and all of its stakeholders,” the company wrote in its SEC filings. “For this to occur, Sears must act immediately to have sufficient runway to continue its transformation.”
In a letter to the Sears Holdings board of directors, ESL expressed interest in purchasing the Kenmore, SHIP and PartsDirect businesses. In addition, ESL also said it was willing to make an offer for certain real estate owned by Sears Holdings and would look to enter into ongoing master lease agreements for some or all of the stores to allow for their continued operations.
In a statement posted on the Sears Holdings website, the board of directors said it was in receipt of ESL’s proposal and has directed the company’s management, legal and financial advisors to work with ESL to seek to pursue liability management transactions outlined in the proposal. All transactions are subject to approval by the board of directors.