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CEO's Plan to Save Sears Would Hand His Hedge Fund $1 Billion
Eddie Lampert’s hedge fund has a new plan for cutting Sears debt. The main beneficiary would be Eddie Lampert’s hedge fund.
Lampert, Sears Holdings Corp.’s chief executive officer, called this week for the underperforming retailer to stanch the bleeding by paying off certain loans -- many of them owned by his hedge fund -- while swapping other debt for notes that convert to equity. This comes at a time when Sears stock is hovering just above $1 a share, an 87 percent dive in the past year.
“To have debt that’s convertible into equity when the equity is worthless doesn’t appear to be a very attractive proposal at all,’’ said Elliot Lutzker, chairman of the corporate law practice at Davidoff Hutcher & Citron LLP.
Lampert’s hedge fund, ESL Investments Inc., is the retail chain’s biggest shareholder. Because it owns about $2.5 billion in Sears debt concentrated in the category earmarked for repayment, ESL could recoup more than $1 billion under its own proposed plan.
Sinking Ship
Lampert has been struggling for years to plug the holes in the sinking ship. He’s shuttered hundreds of money-losing stores and promised to close an additional 150 this year, cut more than $1 billion in annual expenses, spun off units such as Craftsman tools and loaned the company his own money. Since 2012, losses have topped $11 billion. ESL’s restructuring plan, announced Monday, is the latest attempt at managing what some investors see as an end game.
“We will now be working aggressively to execute liability management transactions so that we can extend our runway and continue executing on our transformation strategy,’’ Sears said in a Tuesday internal message to employees seen by Bloomberg. “At the same time, we’ll continue to move forward with our other planned liquidity and cost measures.’’
https://www.bloomberg.com/news/articles/2018-09-27/lampert-s-sears-plan-would-hand-lampert-s-hedge-fund-1-billion
Lampert, Sears Holdings Corp.’s chief executive officer, called this week for the underperforming retailer to stanch the bleeding by paying off certain loans -- many of them owned by his hedge fund -- while swapping other debt for notes that convert to equity. This comes at a time when Sears stock is hovering just above $1 a share, an 87 percent dive in the past year.
“To have debt that’s convertible into equity when the equity is worthless doesn’t appear to be a very attractive proposal at all,’’ said Elliot Lutzker, chairman of the corporate law practice at Davidoff Hutcher & Citron LLP.
Lampert’s hedge fund, ESL Investments Inc., is the retail chain’s biggest shareholder. Because it owns about $2.5 billion in Sears debt concentrated in the category earmarked for repayment, ESL could recoup more than $1 billion under its own proposed plan.
Sinking Ship
Lampert has been struggling for years to plug the holes in the sinking ship. He’s shuttered hundreds of money-losing stores and promised to close an additional 150 this year, cut more than $1 billion in annual expenses, spun off units such as Craftsman tools and loaned the company his own money. Since 2012, losses have topped $11 billion. ESL’s restructuring plan, announced Monday, is the latest attempt at managing what some investors see as an end game.
“We will now be working aggressively to execute liability management transactions so that we can extend our runway and continue executing on our transformation strategy,’’ Sears said in a Tuesday internal message to employees seen by Bloomberg. “At the same time, we’ll continue to move forward with our other planned liquidity and cost measures.’’
https://www.bloomberg.com/news/articles/2018-09-27/lampert-s-sears-plan-would-hand-lampert-s-hedge-fund-1-billion
Money laundering: nice racket if you're a hedge fund CEO.
5 replies
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That's enough to buy chains 3 times the size of Sears.
