UPDATE 2-Sears, once a retail titan, files for Chapter 11 bankruptcy

(Adds pension liabilities, Sears share reaction)

Oct 15 (Reuters) - Sears Holdings Corp filed for Chapter 11 bankruptcy on Monday with a plan to close 142 more stores, throwing into doubt the future of the century-old retailer that once dominated U.S. malls but has withered in the age of internet shopping.

The Chapter 11 filing to reorganize debts of the parent of Sears, Roebuck and Co and Kmart Corp follows a decade of revenue declines, hundreds of store closures, and years of deals by billionaire Chief Executive Officer Eddie Lampert in an attempt to turn around the company he acquired in 2005 for $11 billion.

Lampert had pledged to restore Sears to its glory days, when it owned the tallest building in the world and companies that included a radio station and Allstate insurance.

But the company, which has close to 70,000 employees, has not turned a profit since 2011, and critics say Lampert let the stores deteriorate over the years, even as he bought the company's stock and lent it money, making him its largest shareholder and creditor.

Lampert and his hedge fund ESL Investments Inc own just shy of 50 percent of Sears' shares and are its biggest creditor, with about $2.5 billion owed to him and ESL. He has so far not disclosed whether he has turned a profit or loss since he invested in Sears following years of complex financial engineering at the company.

The company listed $6.9 billion in assets and $11.3 billion in liabilities in documents filed in the U.S. Bankruptcy Court in the Southern District of New York. Its debt to Pension Benefit Guaranty Corp, a U.S. government agency overseeing the retirement benefits of former Sears workers, was not disclosed in the bankruptcy filing.

Sears said its cash crunch had accelerated because concerned vendors required payment sooner.

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. Mohsin Meghji, a managing director of the M-III Partners corporate advisory firm, was appointed chief restructuring officer.

Sears shares were trading down 14 percent in pre-market trading on Monday at 35 cents, giving the company a market capitalization of just $35 million.

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. Strong sales in the upcoming holiday season will be key in determining that.

To fund its operations in the coming months, Sears said it has received a $300-million financing package from its existing lenders and was negotiating an additional $300 million in bankruptcy financing from Lampert's ESL. The bankruptcy court must greenlight this financing.

The largest U.S. toy retailer, Toys 'R' Us, tried to emerge from its 2017 bankruptcy filing but was forced to liquidate six months later after creditors lost confidence in its turnaround plan.

STORE CLOSURES, ASSET SALES

Sears said it will sell assets and begin closing 142 unprofitable stores by year-end with the aim of reorganizing around a smaller platform of around 700 of its best stores.

It is also weighing the sale of "a large portion" of its stores and said they could be bought by Lampert's hedge fund in a bankruptcy auction.

Meanwhile, Sears and Kmart stores are open for business. The company said it is continuing to pay employees' wages and benefits and is working with vendors to ensure its shelves remain stocked.

"The company believes that a successful reorganization will save the company and the jobs of tens of thousands of store associates," Sears said in a statement.

Shares in Illinois-based Sears closed at about 41 cents on Friday, down from over $100 in the years after hedge-fund star Lampert, once hailed as another Warren Buffett, merged it with discount store Kmart in a $11-billion deal in 2005.

Sears dates back to the late 1880s. Its mail-order catalogs with merchandise from toys, medicine and gramophones to automobiles, kit houses and tombstones made it the Amazon.com Inc of its time.

Chicago's Sears Tower was the world's tallest building when it was completed in 1973, but in the following decades consumers increasingly turned to e-commerce and brick-and-mortar rivals such as Walmart Inc and Target Corp.

LAMPERT'S INVESTMENTS

One of the lingering questions for investors has revolved around the value of Sears' assets, which include prime real estate.

The company sold 235 of its best stores for $2.7 billion to a Lampert-created company, Seritage Growth Properties. Lampert also became Land's End Inc's biggest shareholder when the clothing manufacturer was spun out of Sears in 2014.

Those deals could be subjected to new scrutiny by Sears' creditors in bankruptcy court.

"When you go into a bankruptcy, you're living in a fish bowl and every transaction will be looked at and examined," said Corali Lopez-Castro, Managing Partner at law firm Kozyak Tropin & Throckmorton.

In an earlier attempt to avoid bankruptcy, Sears last year sold its Craftsman tool brand to power tool maker Stanley Black & Decker for $900 million. It also signed a deal to sell Kenmore appliances on Amazon.com.

Over the summer, a special board committee Sears created was resisting a rescue offer from Lampert to acquire assets from it, including its Kenmore appliance name.

(Reporting by Tracy Rucinski in Chicago and Tom Hals in Wilmington, Delaware Additional reporting by Jessica DiNapoli in New York and Rama Venkat in Bengaluru Editing by Louise Heavens and Nick Zieminski)