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Sears Holdings Corp. is inching closer to a financial lifeline that it needs to avoid running out of cash while it pursues a turnaround, Bloomberg reported. The new loan won’t involve Sears Chairman Eddie Lampert’s hedge fund, ESL Investments Inc., despite the company’s initial plan for the executive’s firm to arrange that leg of financing. Lampert, through ESL, owns the majority of Sears’s debt in addition to being its primary shareholder. Instead, the retailer has made an unusual pitch to senior lenders: if the banks release certain assets securing their own debtor-in-possession loan, Sears will produce a third-party lender to buy half of that debt, plus provide the remainder of what the company needs. The latest financing effort has come together over a series of meetings with the lender banks, who would agree to extend Sears only $300 million of a requested $600 million in bankruptcy financing last month.

Papa Gino’s Inc. filed for chapter 11 bankruptcy protection Monday with plans to sell itself for $20 million after abruptly closing more than 90 of its pizza and sandwich stores, WSJ Pro Bankruptcy reported. Dedham, Mass.-based Papa Gino’s said it has reached an agreement in principle to sell the company to Wynnchurch Capital, a private-equity firm. Wynnchurch bought about $52 million of the company’s top-ranking loans this summer, after efforts to find a buyer fell through, court papers say. According to court papers, Wynnchurch is offering to “credit-bid” $20 million of the debt for the company and take on some other liabilities. Unless it is improved at a bankruptcy auction, the offer portends a dismal result for Papa Gino’s creditors, including Hartford Life Insurance Co. and Brookside Mezzanine Fund II LP, which are owed about $40 million in the aggregate. Trade debt stands at about $9 million, but that figure will rise as landlords submit claims for rejected leases.

Home improvement chain Lowe’s Companies Inc. announced the closure of another 51 underperforming stores in the U.S. and Canada yesterday as it strives to compete with rival Home Depot Inc. in a slowing housing market, Reuters reported. Lowe’s gave no detail of job losses in the move, which closes stores in some upmarket areas including Broadway and Chelsea in Manhattan and follows the shutdown of 99 Orchard Supply stores in California. Buffeted in recent quarters by the impact of a long winter in North America, Lowe’s has been striving to find ways to catch up with the long-time sector leader Home Depot, whose stores on average generate almost twice as much in sales.

Sears Holdings Corp. is in discussions with Chairman Eddie Lampert and lenders on a deal to expand a bankruptcy financing package that would help it avoid liquidation, Reuters reported. The negotiations come at a critical time for Sears, as it needs enough money to keep its shelves stocked during the holiday shopping season and retain enough support from creditors and vendors to emerge from bankruptcy proceedings. Sears filed for chapter 11 bankruptcy on Oct. 15 with a plan to close about 142 of its 700 stores by the end of the year, throwing into doubt the future of the 125-year-old retailer that once dominated U.S. malls but has withered in the age of internet shopping. Lampert’s hedge fund, ESL Investments Inc, is weighing partnering with other potential lenders to contribute up to $450 million in bankruptcy financing in exchange for key collateral that Sears’ banks currently hold, which includes some store leases, the sources said. In return for giving up their claims on the collateral, the banks would be given the opportunity to reduce their exposure to Sears by contributing $150 million to the bankruptcy financing, rather than the $300 million originally promised. The maneuvers would have the combined effect of boosting the current overall bankruptcy-financing package from $300 million to up to $600 million.

The Toys “R” Us Inc. brand is finding its next life in the grocery aisle, WSJ Pro Bankruptcy reported. The new owners behind the Toys “R” Us brand — a group of hedge funds that pulled the plug on the retailer’s reorganization plans earlier this year — have teamed up with the largest supermarket chain in the U.S., Kroger Inc., to sell toys and other branded merchandise this holiday season. Under the new banner, Geoffrey’s Toy Box, a selection of about 35 toys, including items from Animal Zone, Imaginarium and Journey Girls, will be featured in the so-called pop-up locations at 600 stores. Kroger said on Friday that the assortment, which will range in price from about $20 to $50, will vary by location.

Dollar Tree Inc. won a hard-fought battle to buy Family Dollar more than three years ago, beating out Dollar General Corp. for the roughly 8,200-store chain that caters to low-income shoppers by selling everything from $40 wireless speakers to 55-cent cans of Vienna sausage, the Wall Street Journal reported. Dollar Tree at the time was the smallest of the three discount retailers, and sought more heft to compete with Dollar General and the likes of Walmart Inc. and Target Corp. But now Dollar Tree executives are trying to prove the nearly $9 billion cash-and-stock purchase wasn’t a mistake. Family Dollar’s sales have been sputtering, pulled down by neglected stores, poor product selection and unhappy workers, according to analysts. The problems stretch back to before Dollar Tree bought the business. But executives had hoped to be further along in solving them, say people familiar with the company, and now the stores are dragging on Dollar Tree’s sales and stock price.

Sears Holdings Corp. suppliers who are deciding whether to keep shipping goods to the retailer are seeing warning signs from the market for bankruptcy claims, Bloomberg reported. Few buyers have emerged for the Sears administrative claims, and the bid prices are far below where they stood at a similar stage of Toys “R” Us Inc.’s bankruptcy. The toy retailer looms large because its rapid descent into liquidation in March wiped out some claims buyers. And Sears isn’t helping matters with its delay in securing some of its bankruptcy financing, said sources. “Toys “R” Us spooked the trade claims market,” said Gregory Plotko, a partner in the bankruptcy practice at Richards Kibbe & Orbe LLP. “Accordingly, claims buyers are being more cautious with Sears claims and are waiting to see how the case develops.” Claims traders are offering Sears vendors about 65 to 70 cents on the dollar, whereas Toys “R” Us claims fetched as much as 85 cents early in the toy chain’s bankruptcy process. Read more. 

One of the worst outcomes for a business owner is having a major customer file for bankruptcy and leave behind a large unpaid account receivable. ABI's Business Creditor’s Guide to Distressed Vendors, Debt Collection and Bankruptcy provides an insider’s look into the options available to help screen a business’s customers, plan for worst-case scenarios, and, if the situation does arrive, efficiently handle the fallout. 

Sears Holdings Corp., which filed for chapter 11 protection last month, said yesterday that it would license out the manufacturing of some its Kenmore and DieHard products to third parties, Reuters reported. The company said that the outsourcing of the manufacturing of products such as Kenmore water filtration appliances and DieHard electric vehicle chargers would increase the reach of the brands at U.S. retailers. Terms of the licensing deal were not disclosed. The Kmart-owner’s bankruptcy filing followed a decade of revenue declines, hundreds of store closures and years of deals by Chief Executive Officer Eddie Lampert in an attempt to turn around the company he acquired in 2005 for $11 billion.

The hedge funds that now own the Toys “R” Us brand plan to relaunch the toy retailer as a standalone operation next year, Bloomberg reported. Solus Alternative Asset Management and Angelo Gordon will look to raise capital to help revive the retailer, which closed its last stores at the end of June, and are making plans that include brick-and-mortar locations for the chain. Before opening their own establishments, the funds are partnering with Kroger Co., the largest grocery store operator in the U.S., to create pop-up sections named Geoffrey’s Toy Box in about 600 stores. The areas inside the supermarkets will operate this holiday season, selling a selection of toys from brands like Imaginarium and Journey Girls. The bigger plan is still in the works, sources said, and could change depending on various factors including financing. 

Walmart Inc. filed a lawsuit yesterday against its longtime credit-card issuer, Synchrony Financial, alleging that the lender breached terms of its contract with the retail giant, the Wall Street Journal reported. The lawsuit, filed in the U.S. District Court of the Western District of Arkansas, alleges that some of Synchrony’s underwriting standards financially harmed Walmart. The merchant said that it is seeking damages “in an amount to be proven at trial but estimated to be no less than $800 million.” Synchrony was Walmart’s exclusive credit-card issuer for nearly two decades until Walmart told Synchrony this summer it would replace the card issuer with Capital One Financial Corp.