Lampert: ESL submits $4.6 billion ‘indicative bid’ for Sears assets

By Caroline Salls

Pittsburgh, Dec. 6 – Funds affiliated with ESL Investments, Inc. submitted a $4.6 billion “indicative bid” for substantially all of Sears Holdings Corp.’s go-forward retail footprint and other assets and component businesses, according to a letter from ESL chairman and chief executive officer Edward S. Lampert that was filed Thursday with the Securities and Exchange Commission.

Lampert’s letter said the bid calls for a newly formed entity to acquire substantially all of Sears’ assets through a bankruptcy court-supervised process, as well as substantially all of the assets of non-debtors KCD IP, LLC, SRC O.P., LLC, SRC Facilities LLC and SRC Real Estate (TX), LLC.

Specifically, the letter said the new company would purchase the “go-forward retail footprint of approximately 500 stores and related real estate interests and Sears Auto Centers, Shop Your Way, Kenmore, DieHard, Monark, Innovel, Sears Home Services and related contracts.

Based on information provided by the Sears Holdings debtors, Lampert said the purchased assets would include $1.8 billion of Sears’ retail inventory and credit card and pharmacy receivables.

“Sears is an iconic fixture in American retail and we continue to believe in the company’s immense potential to evolve and operate profitably as a going concern with a new capitalization and organizational structure,” the letter said.

“Our proposed business plan envisages significant strategic initiatives and investments in a right-sized network of large format and small retail stores, digital assets and interdependent operating businesses.”

Lampert said ESL is “prepared to move as quickly as possible to complete customary due diligence for a transaction of this nature and enter into definitive agreements.”

As part of the transaction, Lampert said the new company expects to offer jobs to about 50,000 Sears employees and to reinstate the pre-bankruptcy Sears severance program for all eligible employees.

In addition, the ESL proposal calls for the new company to acquire Sears’ tax assets.

The proposed $4.6 billion purchase price is comprised of up to $950 million in cash to be funded with the proceeds of a new ABL facility, a $1.8 billion credit bid, $500 million in a combination of cash, notes, equity in the new company and/or waiver or assignment of secured debt deficiency claims, the roll-over of $271 million in cash collateral currently supporting a letter-of-credit facility and the assumption of Sears’ liability related to protection agreements issued by Sears Homes Services, gift cards and accrued points under the Shop Your Way program.

Lampert said ESL estimates the liabilities to be assumed to equal $1.1 billion.

The cash consideration included in the purchase price would be financed by a combination of equity contributions and new third-party debt financing. ESL said it has received various proposals from several potential ABL lenders.

“As the holder of valid and enforceable liens and claims, ESL’s interest is conditioned on (1) confirmation of ESL’s right to credit bid its secured debt in the amounts described herein (and without any requirement to cash collateralize or otherwise backstop any portion of the credit bid) and (2) a full release by the debtors of ESL from any liability related to any prepetition transactions involving ESL,” the letter said.

ESL has retained Moelis & Co. as financial adviser and Cleary Gottlieb Steen & Hamilton LLP as legal counsel.

Sears is a retailer based in Hoffman Estates, Ill. The company filed bankruptcy on Oct. 15 in the U.S. Bankruptcy Court for the Southern District of New York under Chapter 11 case number 18-23538.

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