Sears has won some more time to save itself. But not a lot more time.
At a bankruptcy court hearing Thursday, Judge Robert Drain approved Sears’ plan to auction off about 500 stores. The auction is central to the company’s mission to remain in business. Sears intends to use funds from the sale for its operations, and it will pay rent to the stores’ buyers so they can stay open.
A committee of Sears’ creditors had objected to the plan and argued that the company should immediately start the process of going out of business to limit its ongoing losses.
Judge Drain said he will hold another hearing a week before Christmas to consider whether to go ahead with Sears’ effort to stay in business or start the process to close all its remaining stores. Drain said it wasn’t realistic to start a liquidation process immediately.
“You can’t do a GOB [going out of business] plan for a company this big by snapping your fingers,” he said. “Let’s come back to court [in December] and see what the lay of the land is.”
Sears’ attorneys conceded was a chance the company might not be able to survive.
“We recognize we have a tough path ahead of us to save the company,” said Sears attorney Ray Schrock. “We’re not blind to that fact.”
Schrock said the upcoming holiday shopping season is a crucial period for Sears, and the company believes it will at least be able to break even in the fourth quarter.
The creditors’ attorney expressed doubts that the company will be able to stay in business. But he said they could live with waiting until December for a decision on Sears’ future.
Sears also disclosed in a filing late Wednesday that it has arranged for an additional $350 million loan to fund operations during the bankruptcy process. That loan is a crucial component of the company’s ability to stay in business, according to a filing the company made on the first day of the bankruptcy process, but it has taken a month to lock-up the funding.
The loan is from Great American Capital Partners, rather than ESL, the hedge fund controlled by Sears Chairman Eddie Lampert. When Sears first filed for bankruptcy, it said that it anticipated the loan would come from ESL, but creditors have objected to a the series of insider deals between Sears and Lampert.