Sears Chairman Eddie Lampert’s hedge fund, ESL Investments Inc., is interested in scooping up Sears Holdings Corp.’s real estate for $1.8 billion, as well as some other assets, if its offer to buy the company out of bankruptcy as a going concern fails, Sears disclosed in a filing, WSJ Pro Bankruptcy. The billionaire’s hedge fund, which had controlled Sears, last week made a $4.4 billion bid to carve out a chunk of Sears stores and keep them open. At the same time two teams of liquidation firms submitted competing bids to liquidate all of Sears and sell off the pieces, according to people familiar with the matter. If ESL’s bid to keep 425 Sears stores open doesn’t succeed, the hedge fund plans to make a $1.8 billion offer for the company’s real estate, according to the filing on Wednesday. Sears and its independent board members have to determine by Friday if ESL’s bid is “qualified” under the sale procedures approved by the bankruptcy court. If the bid passes muster, Sears and its independent board members will then have to determine if the ESL offer is a better outcome for the company and its creditors than either of the offers from liquidators. Read more.
In related news, credit default swap holders resolved their standoff with one of Sears Holdings Corp.’s largest creditors over an $82.5 million bankruptcy auction that spotlighted potential problems in the multitrillion-dollar derivatives market, the Wall Street Journal reported. Cyrus Capital Partners LP reached settlements with investors on the opposite side of its soured derivative bets on Sears, ending the legal wrangling between them in the company’s bankruptcy proceedings. The settlements brought a quiet resolution to the latest instance of credit default swaps working in unexpected ways. Holders of these insurance contracts, which were triggered when Sears filed for bankruptcy, had accused Cyrus of orchestrating a market squeeze to salvage a bad bet. Read more. (Subscription required.)
