With a few days left to come up with $134 million, Sears seems to be poised to forced to file for bankruptcy.
As the parent company of both Sears and Kmart, Sears Holdings (SHLD) has until a Monday deadline to make good on the $134 million debt, an obstacle that may be too hard to overcome. As of the end of the last fiscal quarter on August 4, the financial records of Sears showed that it only had $193 million in available cash. According to a report released on September 13, the retail company also has $269 million available to access from its lenders.
Because the company needs to ramp up inventory before the holidays and pay the outstanding debt to vendors as well as keep up with payroll and operating costs, it does not appear as if it will have enough money to pay off the debt prior to Monday’s looming deadline. As a result of the dire cash flow situation, stocks of SHLD have plummeted more than 50 percent in the past trading week. Currently, the stock sits at approximately 35 cents per share.
According to the Wall Street Journal, Sears has been proactive and brought on M-III Partners to help them navigate the bankruptcy and restructuring process. Sears also hired a new director familiar with this process to help guide them through the legal implications. Many of the company’s lenders are encouraging the Sears leaders to close the retail locations and begin the liquidation process. However, Sears management hopes to employ Chapter 11 rules and regulations to stay in business during the bankruptcy negotiations rather than having to close operations completely under Chapter 7 rules.
When Sears and Kmart merged in 2005, the company boasted 3,500 stores. Today that number stands at less than 900, as stores continue to shut their doors. Over the summer, the last Sears store in Chicago closed, leaving the once hometown of the former retail giant without any presence. With almost 90,000 employees, the future for a lot of retail workers will be uncertain heading into the busy holiday season.