Is a Bankruptcy Imminent for Sears?

Sears is likely to file Chapter 11 bankruptcy protection. The company plans to plow through the upcoming holiday season, but is leaning toward bankruptcy. The Chapter 11 filing would allow a plan to restructure, versus liquidating immediately.

Department store picture: Sears may file bankruptcy blogSears Holdings is the parent company of Sears and Kmart. According to a recent public records, it is still operating 506 Sears locations (360 Kmart stores).

It is likely that Sears will announce that it will file for bankruptcy, and if this does happen, the nation’s once largest retailer will need a reorganization plan. Because of competition such as Amazon and Walmart, Sears has been struggling as it tries to keep its retail business appealing to shoppers.

With a deadline to pay severe debt, all signs are pointing to Sears Holdings filing bankruptcy.  Surrounding the financial troubles of the company are reports of preparations for filing. Typically, a company that files for bankruptcy negotiates a loan to remain in business while going through the bankruptcy process. Also reported was Sears’ management wanting to use the protection of Chapter 11, which uses a reorganization and restructuring plan (as opposed to Chapter 7, which liquidates and leads to closures).

In 2005, Sears and Kmart formed Sears Holdings and had 3,500 stores in the United States between them. Currently there are under 900 stores following a series of store closings. Sears has announced 46 store closings.

Some reports are calling a bankruptcy filing imminent. If the retailer can negotiate a deal with lenders, it may allow its 900 stores to stay open through the holidays. Some of the Sears stores, however, would have to close immediately (approximately 150 stores). Challenges still remain for the company, however, even if it remains in business over the holidays.

Unfortunately, retail businesses don’t have a great record for success after bankruptcy. Toys R Us, for example has been forced to liquidate after filing a Chapter 11.  Sears does have some value in the Kenmore brand.

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