Sears shares dive 27% after report says retailer is preparing for bankruptcy

Sears may be preparing to file for bankruptcy ahead of a Monday debt payment

Sears may be preparing to file for bankruptcy ahead of a Monday debt payment

Edward Lampert, the hedge-fund manager who is Sears's chairman, chief executive, largest shareholder and biggest creditor, could rescue the company, as he has done in the past by making the payment. When Lampert took over as head of the company five years ago, there were 2,000 stories.

Sears Holdings - which also owns Kmart - has been in an increasing downward spiral for more than a decade. The company is also talking to lenders about providing it with debtor-in-possession financing, CNBC reported.

The impetus for the fast-moving bankruptcy preparation is a $134 million debt payment due this coming Monday.

The committee has been resisting the plan amid concerns that creditors and shareholders would sue over it being too favorable for Lampert.

The sources asked not to be identified because the matter is confidential. Neither Sears nor M-III Partners returned requests for comment.

"For whatever reason, Sears' board said enough is enough", said Chad Brand, president of Peridot Capital Management, which holds Sears bonds.

Sears stores at Golden Triangle Mall in Denton and Ridgmar Mall in Fort Worth closed this year.

At its peak in the 1960s, Sears sold everything from toys and auto parts to mail-order homes, and was a key tenant in nearly every big mall across the United States.

It warned in September for a second time that it could go out of business, hurt by falling foot traffic at its brick-and-mortar stores as customers shift online.

It is not clear whether Sears would survive a bankruptcy process. Share prices of JCPenney, Kohl's and Bed Bath & Beyond were up as of midday Wednesday, which Kopsky said was an indication that the market believes Sears will file for bankruptcy and that those retailers will benefit in the near term.

Sears and Kmart had 89,000 employees as of February 3 of this year, according to a company filing. It has lost $11.7 billion since 2010, its last profitable year. The company thinks it found a director who can help do the trick.

"It's sad, it's really sad to see the end of an era", Perkins said.

Sears shares were down 31 percent at 40.5 cents in afternoon trading in NY, giving the company a market capitalization of just $40 million. Sears' borrowings totaled $5 billion as of August 4. CEO and primary shareholder Eddie Lampert told the company's board that it was crucial it restructure more than $5 billion it owes "without delay", according to a recent regulatory filing.

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