(Reuters) - Sears Holdings Corp SHLD.O is preparing to file for Chapter 11 bankruptcy protection in the coming days following years of declining sales, sources said on Wednesday, casting doubt over the survival of what was once the world's largest retailer. The bankruptcy filing would end a standoff between Chief Executive Officer Eddie Lampert, the retailer’s biggest shareholder and lender, and a special board committee the company has formed to consider a rescue plan proposed by Lampert that would involve asset sales and a debt restructuring. The committee has been resisting the plan amid concerns that creditors and shareholders would sue over it being too favorable for Lampert. His history of financial engineering at Sears for more than a decade through deals tied to his hedge fund ESL Investments Inc could now be subjected to new scrutiny by Sears’ creditors in bankruptcy court, according to the sources. Both Lampert and the Sears special committee now accept that only a court-supervised process can determine the company’s future, one of the sources said. Talks are under way to arrange debtor-in-possession financing for a bankruptcy filing that could come in the next few days, the sources added. CNBC first reported on the debtor-in-possession financing talks, while the Wall Street Journal first reported on Sears’ bankruptcy preparations. A $134-million debt payment that Sears has to meet on Monday has added pressure on both Lampert and the special committee to find a resolution. Lampert had told the special committee he would not help the company fund that obligation unless it agreed to his plan, the sources said. The sources asked not to be identified because the matter is confidential. Spokespeople for Lampert and Sears declined to comment. “For whatever reason, Sears’ board said enough is enough,” said Chad Brand, president of Peridot Capital Management, which holds Sears bonds. Brand added that he had significantly cut down on his Sears bond holdings earlier this year amid concerns from his clients. At its peak in the 1960s, Sears sold everything from toys and 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 AMZN.O, as well as from other brick-and-mortar retailers, including Walmart IncWMT.N. IN THE SHADOW OF TOYS ‘R’ US Slideshow ( 8 images ) It is not clear whether Sears would survive a bankruptcy process. When Toys ‘R’ Us, the largest specialty toy retailer, filed for bankruptcy protection last September, it sought to emerge from it after restructuring its debt and shutting stores. Instead, it was forced to liquidate last March, after creditors balked at providing a new lifeline to the company. If Sears were to file for bankruptcy, its financial performance during the upcoming holiday season could prove crucial in determining its future, according to the sources. Toys ‘R’ Us’ creditors lost faith in the retailer after revenue during last year’s holiday season failed to meet their expectations. Retaining the confidence of vendors is also key to Sears remaining operational. Victor Sandy, who helps suppliers hedge the risk of nonpayment for goods at Michigan-based Global Commercial Credit LLC, said vendors will be looking to see if Sears can secure enough financing to see it through bankruptcy. “The risk is a formal reorganization turns into a liquidation if things do not go well. That is a real risk that we saw happen with Toys ‘R’ Us,” said Sandy. Sears shares were down 31 percent at 40.5 cents in afternoon trading in New York, giving the company a market capitalization of just $40 million. The stock, which traded above $100 a decade ago, has fallen to less than $1 in the past year. Sears’ borrowings totaled $5 billion as of Aug. 4. The Hoffman Estates, Illinois-based retailer has posted seven straight years of losses and its sales have not grown since the 2008 financial crisis. The retailer warned last month it may go out of business if the deals proposed by Lampert were not approved. LAMPERT’S DEALS Lampert, who created Sears in its current form in 2005 by acquiring it in a $11 billion deal and merging it with his discount retailer Kmart, proposed deals to reduce the company’s debt load to $1.2 billion from $5.6 billion in September. The Sears special committee had also been weighing a prior offer from Lampert to acquire the retailer’s Kenmore appliances brand and its home services business for as much as $480 million. Slideshow ( 8 images ) Lampert has invested and lent to Sears many times over the years, making him and his hedge fund the company’s largest shareholders with a stake just shy of 50 percent, as well as its biggest creditor, with about $2.5 billion owed to him or funds he controls. Lambert became Land End's Inc LE.O biggest shareholder when the clothing manufacturer was spun out of Sears in 2014. In 2015, Sears sold 235 of its best stores for $2.7 billion to Seritage Growth Properties SRG.N, a company he created. Such prolific dealmaking has made it difficult to assess whether Lampert has made a profit or loss on Sears over the years. In an earlier attempt to avoid bankruptcy, Sears last year sold its Craftsman tool brand to power tool maker Stanley Black & Decker SWK.N for $900 million. It also signed a deal to sell Kenmore appliances on e-commerce site Amazon.com. Shares of real estate investment trusts (REIT) exposed to Sears properties also fell Wednesday. Seritage slid 5.9 percent, CBL & Associates Properties CBL.N lost 1.1 percent and Pennsylvania REIT PEI.N was down 0.5 percent.<doc-sep>Sears Holdings Corp. could file for bankruptcy as early as this week as the company assesses how to manage its more than $130 million in debt, The Wall Street Journal reported Tuesday. The news outlet reported that Sears has $134 million in debt due on Monday. While chairman Edward Lampert could make the payment, the company has hired M-III Partners, a boutique advisory firm, to put together a possible bankruptcy filing. The Wall Street Journal reported that Lampert, whose hedgefund owns a majority of Sears's shares, is hoping to secure a restructuring of the company's debt, which would include the company divesting from its Kenmore appliance brand. ADVERTISEMENT Sears has accrued more than $11 billion in losses since 2011, and the Journal reported that the company must raise more than $1 billion a year to stay in business. The once-prominent retailer has seen scores of its brick-and-mortar locations close in recent years as it faces growing financial losses. The Wall Street Journal reported that Sears still has nearly 900 stores in business. The company acknowledged earlier this year that it was a victim of a hack that affected fewer than 100,000 of its customers. The hackers likely accessed credit card information belonging to customers who made online purchases at Sears and Kmart stores between late September and October of last year, the company said.<doc-sep>If Sears files for bankruptcy, it is likely the beginning of what has been the long, drawn-out ending to one of the most renowned sagas in retail. Sears is likely to announce as soon as Sunday that it will file for bankruptcy protection, with plans to push through the holiday season, then seek a buyer soon after, says a person familiar with the discussions but not authorized to speak about them. The beleaguered retailer, which has stayed afloat by closing stores and borrowing hundreds of millions of dollars from a hedge fund helmed by its own CEO, is leaning toward a Chapter 11 filing, which would provide it protection to restructure versus having to immediately liquidate. It is trying to secure $300 million to $500 million to continue functioning through the holidays, keeping a winnowed number of locations open, says the person familiar with what is being considered. As of an Aug. 4 public filing, Sears Holdings, the parent company of Sears and Kmart, still had 506 Sears stores and 360 Kmart locations. Also see | Tacoma Sears among 63 Kmart and Sears stores to close If the bankruptcy filing occurs, it is likely the beginning of what has been the long, drawn-out ending to one of the most renowned sagas in retail. Sears, once the nation's largest retailer, has been on the ropes for years, struggling to remain relevant amid a shopping landscape transformed by the rise of e-commerce competitors such as Amazon, big-box giants such as Walmart and specialized chains such as Best Buy, which offer similar products with a more appealing experience. Now, Sears is facing a critical Monday deadline to make a $134 million debt payment. Reports this week by the Wall Street Journal and CNBC said Sears had begun consulting with advisers to prepare a possible bankruptcy filing. Sears CEO Eddie Lampert said last month in a letter that the company "must act immediately'' on his most recent proposal to sell more assets and slash debt. Lampert had offered to buy Sears' popular Kenmore appliance brand for $400 million.<doc-sep>
All retail bankruptcies are not the same. Here's what you need to know NEW YORK, UNITED STATES - 2020/07/08: People wearing face masks shopping inside a retail store in Manhattan as the city enters phase 3 of reopening amid the coronavirus pandemic As New York City enters phase 3 of reopening retail stores for indoor shopping, restaurants have been postponed for indoor dinning. The U.S. Department of Health recorded a total of 3,219,999 infections, 135,822 death and 1,426,428 recovered since the beginning of the outbreak. (Photo by Braulio Jatar/SOPA Images/LightRocket via Getty Images) NEW YORK, NEW YORK - NOVEMBER 19: A view of the window display as Macy's Herald Square unveils Give, Love, Believe 2020 Holiday Windows on November 19, 2020 in New York City. (Photo by Eugene Gologursky/Getty Images for Macy's) One of many large boxes of returned products that fill the warehouse. The returned products in this box will eventually be sorted and categorized. This airplane-shaped bag is selling for more than some actual planes (CNN Business) — Sears has to come up with $134 million very quickly. Sears Holdings (SHLD), the parent company of Sears and Kmart, faces a Monday deadline to pay that much in debt. The most recent filing from Sears showed it had only $193 million in cash on hand as of August 4, the end of its last fiscal quarter. The company also has $269 million available to it from lenders, according to figures it released on September 13. Having so little cash available would make it very difficult for Sears to pay back $134 million in debt due on Monday. Plus, Sears also has to pay its current vendors and employees and stock up inventory before the holidays. All signs point to a bankruptcy filing in the next few days. Sears’ stock has fallen more than 50% in the last five trading days to around 35 cents a share. Three companies that sell items at Sears told Reuters this week that Sears had missed payments to them over the past few weeks. One of Sears’ major shareholders recently dumped a chunk of his stock for pennies on his original investment. The company added a new director this week who is familiar with bankruptcies and restructuring. And reports are swirling that the company is talking to advisers and banks in preparation for a bankruptcy filing. According to the Wall Street Journal, Sears has hired M-III Partners, a boutique advisory firm specializing in seeing companies through bankruptcies and restructuring, The company is also talking to lenders about providing it with debtor-in-possession financing, CNBC reported. That kind of loan is used by companies that file for bankruptcy to fund operations during the process. Usually, funding is secured well before the final days. Companies that file for bankruptcy typically negotiate a special kind of loan to stay in business while they go through the bankruptcy process. There are several reports that Sears is in talks for that kind of financing, but negotiations don’t appear to be going well. The company’s lenders are encouraging Sears to shut down and liquidate, the Wall Street Journal reported Thursday. Sears’ management has reportedly said it hopes to use Chapter 11 of the bankruptcy law to stay in business rather than Chapter 7, which leads to closing. If Sears does file for Chapter 11, the company could try to stay in business, using the court process to shed debt and unaffordable leases. It could attempt to emerge as a profitable company. But the retail landscape is littered with brands that tried to reorganize in the bankruptcy process and liquidated their businesses instead, such as RadioShack, Toys “R” Us and Sports Authority. Sears and Kmart merged to form Sears Holdings in 2005, when they had 3,500 US stores between them. A long series of store closings has left it with under 900 today. In July Sears closed its last store in Chicago, once its hometown. The company recently announced another 46 store closings that will take place just before the start of the holiday shopping period. Sears and Kmart had 89,000 employees as of February 3 of this year, according to a company filing.