Exclusive - Sears CEO Lampert explores bidding for assets in bankruptcy: sources

By Mike Spector and Jessica DiNapoli

(Reuters) - Sears Holdings Corp Chief Executive Officer Eddie Lampert is exploring a bid for some of the cash-strapped U.S. retailer's businesses and real estate once it files for bankruptcy, an alternative to a traditional court-supervised reorganization, people familiar with the matter said on Thursday.

Under this scenario, the 125-year-old department store operator, once the world's largest retailer, would initially avoid an outright liquidation, but would have to navigate the bankruptcy process without some of its key assets. At stake is the future of roughly 90,000 employees and 900 stores, including Kmart, which Sears also operates.

Lampert, a billionaire who is also Sears' biggest shareholder and lender, is considering bidding for its Kenmore appliances brand and its home services business, in addition to some real estate, the sources said.

Sears is also weighing a traditional bankruptcy reorganization, and no final decisions have been made, the sources added.

Lampert had already offered as much as $480 million for the Kenmore and home improvement unit of the home services businesses as part of an out-of-court rescue plan, and is mulling trying to buy these assets and more through bankruptcy auctions under this option, the sources said. The auctions would be executed under Section 363 of the U.S. bankruptcy code.

The exact assets that Lampert might buy in bankruptcy remained in flux, the sources said.

Lampert could help finance his bids for the assets by forgiving some of the money Sears owes him, as opposed to putting in more cash, one of the sources said.

Sears is still negotiating potential financing to keep it afloat while under bankruptcy protection after discussions with banks on Wednesday night failed to result in an agreement, the sources said.

Another meeting with potential financing sources was planned for Thursday, the sources added.

The sources declined to be identified because the deliberations are confidential. A Lampert spokesman declined to comment while a Sears spokesman did not immediately respond to a request for comment.

"There are assets he can buy that are underpriced," said Carlos Castelan of retail consulting firm The Navio Group. "If his hedge fund is at the top of the list from a creditor perspective, (he) should be able to have first rights on the business."

Sears shares ended trading on Thursday down 30 percent at 34 cents, giving the company a market capitalization of just $37 million. Sears' borrowings totalled $5 billion as of Aug. 4.

Sears faces a key $134 million debt payment on Monday that Lampert has refused to fund from his hedge fund ESL Investments Inc unless a special committee formed by the Sears board of directors accepts his rescue plan.

The committee has declined to do so amid concerns over a backlash from other Sears creditors and shareholders, leaving bankruptcy as the company's only option.

Sears has started to miss payments to vendors, adding to concerns about its future, Reuters reported.

FALLING SALES

At its peak in the 1960s, Sears sold everything from toys to auto parts to mail-order homes, and was a key tenant in almost every big mall across the United States.

But it has struggled to reinvent itself in the face of online competition from companies such as Amazon.com Inc, as well as other brick-and-mortar retailers, including Walmart Inc.

The Hoffman Estates, Illinois-based retailer has posted seven straight years of losses and its sales have not grown since the 2008 financial crisis.

Lampert has invested and lent to Sears many times over the years, giving him an equity stake just shy of 50 percent. The retailer also owes about $2.5 billion to Lampert or funds he controls.

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 e-commerce site Amazon.com.

(Reporting by Mike Spector and Jessica DiNapoli in New York; editing by Jeffrey Benkoe and Cynthia Osterman)