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Struggling Sears Names Distressed Advisory Expert Carr as Independent Director

Sears Holdings Corp.‘s board yesterday named Alan Carr as an independent director. Carr is managing member and CEO of Drivetrain, a distressed and restructuring advisory firm.

Carr is set to hold the position until the issuer’s 2019 annual shareholder meeting or until a successor is elected and qualified, according to a company filing.

Soon-to-mature bonds of Sears were thinly traded on news of Carr’s appointment, with the issuer’s roughly $134 million of 6.75% second-lien notes due Oct. 15 changing hands on either side of 87.5, roughly in-line with levels week-over-week.

In addition to the above-mentioned notes, Sears has $668 million of other debt maturing in the next twelve months, according to regulatory filings.

The move comes two weeks after Sears CEO Eddie Lampert’s hedge fund ESL Investments outlined a multi-pronged proposal for the distressed retailer to avoid bankruptcy, according to an amended filing with the SEC. Lambert’s Sept. 23 plan calls for the restructuring of around $1.1 billion of the company’s debt via a distressed exchange that would reduce its $5.6 billion debt burden to approximately $1.24 billion, assuming all sale proceeds are used to pay down debt, according to the filing.

Lambert’s proposal also urges the company to sell $1.5 billion of real estate as well as divest some $1.75 billion of assets, including Sears Home Services and the Kenmore appliance brand, the proceeds of which would be used to pay down debt.

As reported, Lampert earlier this year urged the ailing retailer to sell its prize assets, writing in a letter that ESL is willing to acquire the Sears Home Services division and PartsDirect business. ESL has also offered $400 million to acquire the Kenmore brand.

In terms of the previously mentioned distressed exchange, ESL has proposed that eligible holders of the ESL second-lien PIK loan due 2020 and 2019 would be offered the option to exchange their holdings for mandatorily convertible secured debt or else extend maturities with a reduced conversion price. Unsecured holders are offered the choice to swap into mandatorily convertible unsecured debt or a cash option. The aforementioned 6.75% second-lien notes due October 2018 are excluded from the proposal.

Hoffman Estates, Ill.–based Sears Holdings operates in two segments, Kmart and Sears Domestic. Sears Roebuck Acceptance Corp. operates as a subsidiary of Sears, Roebuck and Co., which itself is a subsidiary of Sears Holdings. Ratings are CCC–/Ca on Sears Holdings and CCC–/C on Sears Roebuck Acceptance Corp. — James Passeri/Rachelle Kakouris

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