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Sears CEO's hedge fund receives inquiries from potential partners for asset sale

ESL Investments Inc., the hedge fund of Sears Holdings Corp. CEO and Chairman Edward Lampert, has received "numerous inbound inquiries from potential partners" in connection with its proposal to acquire certain assets of the U.S. department store chain and its Kenmore appliance brand.

In a letter filed with the SEC on May 29, Lampert said they are seeking permission from the special committee of Sears' board to engage with these potential partners so they can put forward a definitive proposal that will be most beneficial to Sears.

The initial proposal submitted by the fund on April 20 outlined a set of changes necessary to improve Sears' capital structure, including a recapitalization that would reduce the company's debt. However, in the month since its original letter, ESL said there has been a significant increase in the market price of Sears' unsecured debt that could make the contemplated exchange of debt for equity and debt repurchases less attractive and more difficult to execute.

"We believe that the special committee can achieve its goal of fostering a competitive process while at the same time permitting ESL to speak with third parties who are not engaged in substantive discussions with the special committee or its advisors that are likely to result in an executable transaction," Lampert said in the latest letter.

"Speed and certainty here are critical," he added. "It is imperative that the special committee allow us the ability to find a partner in accordance with the timeline necessitated by the liquidity needs of the company."

The development comes around two weeks after Sears started a formal process to explore the sale of its Kenmore brand and other related assets, including the Sears Home Improvement Products business and the Parts Direct business of the Sears Home Services division.