The Wall Street Journal reported Wednesday that Sears has hired an advisory firm to prepare bankruptcy filings for the retailer as early as this week, ahead of a $134 million debt payment that is due Monday.
What are the details?
Unnamed sources told the Journal that employees from New York-based M-III Partners have been working on the potential filing for weeks, indicating that the company’s bankruptcy could be imminent.
Sears Holdings — which also owns Kmart — has been in an increasing downward spiral for more than a decade. The company is currently $5.6 billion in debt, has closed more than half its 2,000 stores since 2004, already sold off most of its major brands, and has seen its shares reduced to penny stock status within the past few weeks.
Hedge fund manager Edward Lampert, who serves as Sears’ chairman, CEO, largest shareholder, and biggest creditor, announced an attempt at restructuring the company’s debt on Sept. 24.
Since then, the stock has lost two-thirds of its already depressed value, dropping 36 percent during midday trading on Wednesday alone, as several more indicators are showing investors the handwriting on the wall.
On Tuesday, Sears announced that it had hired restructuring expert Alan Carr as an independent director. The same day, the company revealed that a major shareholder had dumped 142,000 shares this week for only 59 cents to 65 cents a share. CNN reported that while that sell-off represented only 8 percent of the investor’s holdings, he could be cutting his losses since “shareholders are typically wiped out in bankruptcy.”
Business Insider reported on Wednesday that Sears’ top spokesman, Chris Brathwaite, jumped ship just days ago after more than a decade working at the company. Sears’ acting spokesman, Howard Riefs, said Brathwaite had informed the retailer of his exit last month.
Larry Perkins, founder and CEO of consulting firm SierraConstellation Partners, told the Washington Post on Wednesday that Sears’ hiring of bankruptcy experts “is not a sure sign by any means, but it’s certainly a leading indicator” that bankruptcy could be on the horizon.
“This has been the slowest moving train wreck happening for literally years,” Perkins added.