Sears' and Kmart's chairman, chief executive, largest shareholder and biggest creditor - reportedly is looking for a larger restructuring than just anteing up more cash to bail out the cash-strapped retailers.
The committee has been resisting the plan amid concerns that creditors and shareholders would sue over it being too favorable for Lampert.
Both Lampert and the Sears special committee now accept that only a court-supervised process can determine the company's future, one of the sources said. CNBC earlier reported that the company was arranging a bankruptcy loan, known as debtor-in-possession financing. It operates a network of stores with 866 full-line and specialty retail stores in the United States as of August 4, operating through Kmart and Sears.
Shares of Sears, which traded as high as $144 over a decade ago, closed Tuesday at 59 cents, a sign that investors are bracing for a potential bankruptcy filing or restructuring. But it has struggled to reinvent itself in the face of online competition from companies such as Amazon.com Inc (AMZN.O), as well as from other brick-and-mortar retailers, including Walmart Inc(WMT.N).
It hired boutique advisory firm M-III Partners LLC, the Wall Street Journal reported late yesterday, citing people familiar with the situation it didn't identify. The 125-year-old retailer, based in Hoffman Estates, Illinois, has relied on piecemeal deals and infusions from the hedge fund manager to offset billions of dollars in losses.
The Sears special committee had been weighing a prior offer from Lampert to acquire the retailer's Kenmore appliances brand and its home services business for as much as $480 million.
In May, Sears said it plans to shut 72 locations by the end of third quarter to stem losses in the face of deepening financial distress.
In another attempt to avoid bankruptcy, Sears past year sold its Craftsman tool brand to power tool maker Stanley Black & Decker for US$900 million. Lampert bought Sears in 2004 and merged it with Kmart, in which he had a controlling stake, the next year. He also called on the company to sell off $3.25 billion in real estate and assets. While the SPDR S&P Retail ETF (XRT) is up 6.5% year to date, and fellow department stores like Macy's (M), Kohl's (KSS), and Nordstrom (JWN) have climbed more than 30% since the start of the year, Sears has lagged-and how.