The 126-year-old company, the descendant of the mail-order catalog that reshaped American commerce, rejected a $US4.4 billion ($6.2 billion) offer for selected stores from Lampert and his hedge fund, ESL Investments Inc., on Friday.
Sears could be closing its doors for good if it doesn't accept the only bid to save it.
That bid had included $1.3bn (£1bn) in financing from three institutions, ESL said in a statement. Drain said other parties could submit new or improved bids, and Sears' financial advisers would let them know if they would be considered at the auction.
Sears Holdings Corp agreed on Tuesday to consider a revised takeover bid from Chairman Edward Lampert, temporarily staving off a liquidation that would have spelled the end of the 126-year-old USA department store operator. Lampert's last offer was funded by conversion of debt to equity.
The creditors have argued that forgiveness of his debt should not be accepted as part of the bid, because Lampert loaned Sears the money when he was CEO. Meanwhile, Lampert also plans to present details of his offer and make the case for renewing efforts to save Sears in bankruptcy court on Tuesday.
The 11th hour negotiation is yet another twist in the rocky journey of Sears whose fate has been hanging in the wind, particularly since it filed for Chapter 11 bankruptcy on October 15.
Reuters reports the negotiations between Lampert and the company broke down over the structure of his bid, as well as the former CEO's request to not be held liable for actions he took while servicing as the company's chief executive.
As late as Monday night, the company had told involved parties it was planning to announce a liquidation before the market opened on Tuesday in NY, according to a person with knowledge of the matter.