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Sears files for bankruptcy as CEO steps down

Edward Lampert stepped down as CEO of Sears Holdings Corp. as the struggling U.S. department store operator filed for bankruptcy protection early on Oct. 15.

In a statement released shortly after the filing was made with the U.S. Bankruptcy Court for the Southern District of New York, Sears said Lampert's departure from the CEO post was effective immediately, but he would remain chairman of the company.

In Lampert's stead, the board created an office of the CEO that will now be responsible for managing Sears' day-to-day operations during the bankruptcy process. It will include CFO Robert Riecker, Chief Digital Officer Leena Munjal, and apparel and footwear president Gregory Ladley.

The move came as an Oct. 15 due date arrived for Sears to make a $134 million debt payment. In the bankruptcy court filing, the retailer reported estimated assets in the range of $1 billion to $10 billion, and estimated liabilities of between $10 billion and $50 billion.

Sears secured a debtor-in-possession financing commitment of $300 million from its senior secured asset-based revolving lenders, and is negotiating a $300 million subordinated debtor-in-possession financing with Lampert's hedge fund ESL Investments Inc. to help it stock shelves for the holiday shopping period.

Sears said it expects to move through the restructuring process "as expeditiously as possible" and will soon pursue a reorganization plan focusing on a smaller platform of EBITDA-positive stores. During the transition to Chapter 11, Sears plans on business as usual by continuing to pay employees' wages and benefits, honor member programs, and pay vendors and suppliers for all goods and services provided on or before the bankruptcy filing date.

The retailer said the Sears and Kmart chains will continue to operate as usual along with their online and mobile platforms, in addition to other services and brands operated by the company. However, it plans to close 142 unprofitable stores near year-end, which will be in addition to the 46 stores expected to be shuttered by November.

Lampert said in an Oct. 15 statement: "While we have made progress, the plan has yet to deliver the results we have desired, and addressing the company's immediate liquidity needs has impacted our efforts to become a profitable and more competitive retailer." Through ESL, Lampert had pushed for a restructuring plan that called for cutting debt and selling off assets such as the Kenmore brand.

Sears said it is currently in discussions with ESL regarding a stalking-horse bid to purchase a large part of the company's store base.

Meanwhile, Sears has appointed Mohsin Meghji, managing partner at M-III Partners LLC, as chief restructuring officer. This confirms an earlier report by The Wall Street Journal that the company had hired the investment and advisory firm to assist with a bankruptcy filing.

It also appointed Transier Advisors LLC CEO William Transier as an independent director, and formed a committee to oversee the restructuring process and decide on transactions involving affiliated parties. That committee includes independent directors Paul DePodesta, Ann Reese, Transier and Alan Carr, a restructuring expert who was appointed to the board less than a week ago.

Lazard Frères & Co. LLC is acting as Sears' investment banker during the process.