Desperate Sears Holdings is auctioning debt in the Hallway

Sears Holdings is desperately trying to sell 505 stores and borrowing money in the bankruptcy court hallway.

Sears Holdings attorney Sunny Singh agreed to borrow $350 million from Cyrus Capital Partners at the federal courthouse in White Plains, New York, The Chicago Tribune claims. The Tribune speculates the loan was negotiated outside a courtroom where Judge Robert Drain was overseeing Sears’ Chapter 11 bankruptcy proceedings.

Moreover, Cyrus and another hedge fund called Great American Capital Partners got into a bidding war over Sears’ debt in the courthouse hallway on 27 November 2018.

“We had bidding for the junior DIP literally outside in the hallway for the last hour,” Singh reportedly told Judge Drain. Notably, Cyrus could have purchased $350 million worth of Sears’ debt for $82.5 million in the hallway.

Cyrus; a major marketer of credit default swaps also won an auction for $251 million worth of internal Sears debt. Thus, Cyrus will make money even as Sears employees get the shaft again.

Sears Holdings is trying to Sell 505 Stores

Debt is not the only thing, Sears Holdings is trying to unload. The Chicago Tribune reports Sears is seeking buyers for 505 stores.

If a buyer cannot be found for the stores by December 5, 2018, (next Wednesday) Sears could liquidate the locations. Notably, Sears Holdings is seeking bids on the liquidation of the stores as well.

Sears is planning to sell or liquidate most of its locations if The Tribune is correct. Sears operated 866 stores in August 2018, USA Today estimates. In detail there were 506 Sears’ stores and 360 Kmart outlets in operation over the summer.

However, that number has probably shrunk because of recent closings. Notably, Sears planned to close 13 Kmarts and 33 Sears stores in November. Hence Sears is probably operating around 820 stores.

Thus Sears is planning to shrink its footprint to 315 stores if The Tribune and USA Today are correct. Under those circumstances, most of the company’s stores will close.

Will Kmart Disappear?

I think there is a strong possibility Kmart will simply disappear. To clarify it appears that Sears Holdings is planning to eliminate several hundred stores.

I believe the logical way to achieve that goal is to simply close out Kmart. Thus, the company will be left with a rump Sears Holdings that could be easily sold.

For example, retailers like Walmart (NYSE: WMT), Amazon (NASDAQ: AMZN), or TJX (NYSE: TJX) could be interested in some Sears and Kmart locations.

In particular, Amazon is planning to open 3,000 Go cashier-less stores and TJX operates department stores. Sears operated 482 full-line department stores in August 2018.

Consequently, the final act at Sears and the vultures are circling. I predict large-scale liquidation could begin at Sears as early as next week.

Therefore, if you want to see Sears and Kmart, you had better hurry. Those retail legends are likely be gone by February 2019.