Early Monday morning, Sears announced it had filed for Chapter 11 bankruptcy - which would allow it to reorganize and possibly reemerge from bankruptcy with some part of the business intact - and received commitments for $300 million in debtor-in-possession financing to carry through the bankruptcy period while it restructures its debt and reorganizes its business.
Sears, which took over smaller rival Kmart in 2004, is the latest in a line of retailers to have filed for bankruptcy or liquidated in the last few years.
Sears and Kmart stores will remain open with help from $600 million in new loans, but the company will shut 142 unprofitable outlets near the end of the year, on top of 46 unprofitable stores already scheduled for closure by November.
But it has struggled to reinvent itself in the face of online competition from companies such as Amazon.com Inc, as well as other brick-and-mortar retailers, including Walmart Inc.
New Look, Marks & Spencer and House of Fraser have also seen stores close this year.
For now, Sears will be run by an Office of the CEO, and independent directors will oversee the restructuring.
Under the bankruptcy plan, Lampert's executive role will be replaced by a three-person committee, though he will remain as chairman of the board. Paula Rosenblum, co-founder of Retail Systems Research, wrote in Forbes that Lampert would emerge from a Sears bankruptcy as the least-sympathetic victim and perhaps the largest beneficiary.
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In recent weeks, Lampert has been pushing for a debt restructuring and offering to buy some of Sears' key assets, like Kenmore, through his hedge fund as a $134 million debt repayment came due on Monday. Such a plan could potentially keep a slimmer Sears alive as a going concern, the sources said.
Some like Payless ShoeSource have had success emerging from reorganisation in bankruptcy court but plenty of others have not, including Toys R Us and Bon-Ton Stores, both of which collapsed after a Chapter 11 filing. He's shuttered hundreds of money-losing stores, cut more than $1 billion in annual expenses, and spun off units such as Lands' End.
Shareholders generally lose all or most of their investment when a company files for bankruptcy, and the ability of Sears to escape liquidation will depend on the willingness of creditors and suppliers to keep the company afloat.
The filing, which is happening ahead of the crucial holiday shopping season, comes after rescue efforts engineered by Lampert have kept it outside of bankruptcy court until now.
The company was started by Richard Sears, a train station agent in Minnesota who began selling watches by mail in 1886, according to the company's website. Sears moved to Chicago in 1887, and he hired watchmaker Alvah Roebuck as his partner.
Kmart stores and online channels also remain open. In April and August, ESL presented proposals to acquire certain Sears assets, followed by a broader September plan for real estate transactions and asset sales. Once the dominant appliance retailer in the country, Sears accounted for only 3% of Whirlpool's sales worldwide in 2017.