Department Stores

Sears adds board member with restructuring experience as key payment looms

Key Points
  • Sears Holdings has added restructuring expert Alan Carr to its board.
  • Carr is CEO of restructuring advisory firm Drivetrain.
  • Sears is approaching a key debt payment it has already warned it may not meet. 
Inside a redeveloped Sears store in Danbury, Connecticut.
Source: Sears Holdings.

Sears Holdings has added restructuring expert Alan Carr to its board as the retailer approaches a key debt payment it has already warned it may not meet.

Carr is CEO of restructuring advisory firm Drivetrain. In his former role as attorney at law firm Skadden, Arps, Slate, Meagher & Flom, he served as director of reorganized businesses, the Sears release announcing Carr's appointment said.

"Alan brings deep experience as a director for companies that went through complex organizational change," said Sears CEO Eddie Lampert in the statement. "We are pleased to welcome him to the board and look forward to the benefit of his expertise as we work to maximize value for the company and its stakeholders."

The announcement comes roughly a year after longtime Sears investor, Bruce Berkowitz, stepped down from his board seat.

Sears' shares were down 1.5 percent in premarket trading Tuesday. Its stock price dropped below the $1 mark for the first time on Sept. 28 and on Tuesday morning it was trading at 63 cents.

The role of the Sears board has become an increasingly pivotal position as the retailer grapples with declining sales, a sagging debt load and multiple stakeholders trying to protect their own interests.

A special committee to the board is evaluating Lampert's proposal to buy assets from the company through his hedge fund ESL Investments, echoing a tactic he has previously used to infuse liquidity into Sears. The special committee was formed to balance the potential conflict of interest inherent in ESL's bid. Lampert has a controlling ownership stake in Sears, with personal ownership of roughly 31 percent of the retailer's shares outstanding.

The special committee holds the power to approve Lampert's offer or hold out for higher or less conflicted offers. The assets at stake include its Kenmore brand, Parts Direct business and portions of Sears' home improvement division.

Finalizing the sale of those brands may be Sears' only remaining lifeline. Last Monday, it passed the deadline in which it had previously warned it may not meet debt maturity reserve requirements. The reserve is associated with a note that has a $134 million maturity due on Oct. 15, which the company has also warned it may not meet.

As time ticks, ESL has put forward a restructuring proposal that would reduce the retailer's total debt by nearly 80 percent to $1.24 billion. After years of Lampert stripping out assets to keep the company afloat over the past several years, it's unclear whether Sears' current debtholders will continue to support these efforts, which have amounted effectively to restructuring outside of formal bankruptcy proceedings.

Those debtholders must be convinced that Sears is worth more than the value of its assets — namely its real estate and its brands — despite its constant losses. The longer Sears waits to file for bankruptcy, the more the value of its assets arguably decline.

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