Sears Chairman Eddie Lampert is upping the ante in his effort to buy the bankrupt retailer he ran for almost half a dozen years. The billionaire investor, formerly Sears' CEO and majority shareholder, through his hedge fund ESL Investments raised his offer to $5 billion, from $4.4 billion, in a bid to win approval from a federal bankruptcy court.
"As we have said before, our proposal provides substantially more value to stakeholders than would be the case in liquidation and is the only option to save an iconic American retailer and up to 50,000 jobs", the statement reads.
ESL says it will not be entitled to any break-up fee if its bid is not chosen, and, if approved by the debtors and the court, it would only be reimbursed for expenses outlined in the revised asset purchase agreement, according to the filing.
According to Bloomberg, Lampert's offer was rejected because there was too little cash to cover costs incurred in bankruptcy, and it undervalued inventory and other assets compared with what liquidators were indicating they would pay.
To finance the new offer, ESL has received debt commitment letters from certain lenders related to a new asset-backed loan facility and from funds managed by Cyrus Capital Partners to roll over certain debt facilities and for a new secured real estate loan, the filing showed. ESL already agreed to put up half the money, and "we now expect that other lenders will provide the balance of the commitment in the near term". The hedge fund will also assume $135 million in tax bills for properties that Lampert hopes to acquire as part of his bid.
In the filing, Lampert said he is still enthusiastic about the deal and about Sears' future in the retail space.
A bankruptcy auction for the assets of Sears Holdings is scheduled for January 14, where Lampert's bid, if accepted, will compete with bids from liquidators. Assuming Lampert's latest offer gets the green light from creditors and the bankruptcy judge, he can go up against bidders looking to buy up Sears Holdings assets through the bankruptcy process. This could hobble Lampert's bid, which depends partly on exchanging debt for control of the company. It will have to compete with others bidding for pieces of the firm. The company would be better off going into liquidation and selling off the profitable operating units, he said.