- Sears' advisors are testing just how much Chairman Eddie Lampert wants to keep the retailer alive.
Lampert has put forward a $4.4 billion bid to save Sears and 50,000 jobs by buying it out of bankruptcy through his hedge fund ESL Investments. His offer, though, which is largely funded with outside sources of capital, is facing tough scrutiny from Sears advisors, people familiar with the situation tell CNBC. If the two are unable to find a resolution, it could force Sears to liquidate.
The 125-year-old retailer, which also owns Kmart, filed for bankruptcy in October. At the time, it employed 68,000 workers.
Sears advisors' have until 4:00 p.m. ET on Friday to decide whether ESL's bid is viable. The company and ESL met earlier this week to discuss its bid, without agreeing to a compromise.
The offer has raised a number of flags, the people said. It is short of covering the fees and vendor payment it owes, making it "administratively insolvent."
A continuing issue is the $1.8 billion that Lampert put toward his offer by forgiving debt owed to ESL through a so-called credit bid. The restructuring committee advising Sears is not confident the bankruptcy judge will allow Lampert to use a credit bid without addressing a pending investigation about Sears transactions under Lampert's ownership, the people said.
Sears' unsecured creditors have said there may be claims against Sears for those deals, which include Sears' spinoff of Lands' End LE and transactions with Seritage Growth Properties SRG , a real estate investment trust Lampert created through some Sears' properties.
ESL has stressed that all transactions it did with Sears during Lampert's tenure were approved by Sears' board.
As with all bankruptcy negotiations, it remains possible either side will make concessions to end the disagreement. The two parties therefore could come to a resolution to divert liquidation.
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