Sears hires advisers for bankruptcy filing

One of Sears' major shareholders just dumped a chunk of his stock for pennies on his original investment

Edward Lampert, the hedge-fund manager who is Sears's chairman, chief executive, largest shareholder and biggest creditor, could rescue the company, as he has done in the past by making the payment. The committee is concerned it will be opening the company up to litigation, one source said. But if Sears is now in touch with banks to secure the financing needed for a bankruptcy filing, as CNBC reported Wednesday morning, that could send the surest signal that such a move may not be so far off.

Looming before Sears is a $134 million debt payment that comes due on Monday. Lampert divided the expanded company into dozens of units that competed for resources. Spokespeople for Lampert and Sears declined to comment. Sears previously said any decision would require approval of its independent board members. Sears Canada declared bankruptcy previous year.

At its peak in the 1960s, Sears sold everything from toys and auto parts to mail-order homes, and was a key tenant in nearly every big mall across the United States.

Sears, an icon of American retailing since the 19th century, has struggled to appeal to consumers in recent years, losing customers and financial strength in the process.

However, Lampert wants to restructure the debt without filing for bankruptcy protection, because he views bankruptcy as risky for retailers, the Journal said.

Sears continues to discuss other options and could still avert an in-court restructuring, the people added.

Sears shares were down 31 percent at 40.5 cents in afternoon trading in NY, giving the company a market capitalization of just $40 million. The stock, which traded above US$100 a decade ago, has fallen to less than $1 in the past year. The company is now $5.6 billion in debt.

The Hoffman Estates, Illinois-based retailer has posted seven straight years of losses, while its sales have not grown since the 2008 financial crisis. Sears warned it could go out of business as it waits for approval from the committee on the deal.

Lampert, who created Sears in its current form in 2005 by acquiring it in a $11 billion deal and merging it with his discount retailer Kmart, proposed deals to reduce the company's debt load to $1.2 billion from $5.6 billion in September. The company has closed hundreds of Sears and Kmart stores and sold pieces of its business, including the Craftsman tools brand.

The Sears notes coming due on October 15 traded Tuesday morning at 87 cents on the dollar, according to MarketAxess.

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