Sears Won’t Close Yet as Its Chairman, Edward Lampert, Fends Off Creditors

Sears lives. For now.

The bankrupt retailer and Edward S. Lampert have reached $5.3 billion deal that would keep its 425 stores open and its 50,000 employees at work, according to a person familiar with the situation.

In the deal, which was reached in the early morning hours on Wednesday, Mr. Lampert would acquire most of Sears’s assets, the person said. The final details of the sale still needed to be arranged, and negotiations were expected to continue through the day and could still apart.

Mr. Lampert, a hedge fund manager and Sears’s chairman, was the only bidder at a closed-door auction this week who sought to keep the company operating as a “going concern.” All of the competing bidders planned to liquidate the company’s real estate, inventory and brands.

A federal bankruptcy judge must still approve Mr. Lampert’s bid at a hearing later this month, giving the company’s creditors a chance to derail the deal. At a hearing last week, the bankruptcy judge, Robert D. Drain, said Mr. Lampert’s bid was “a good development” because it offered Sears a shot at survival.

If the deal is approved, Sears will emerge from bankruptcy with less debt but it will still face steep odds in winning back shoppers. Mr. Lampert is deepening his investment in Sears at a time of great uncertainty for old-line retailers. While overall consumer spending has been solid, some retailers like Macy’s and JC Penny reported weak holiday sales, signaling that their turnaround plans are floundering as Americans change the way they shop.

[Read more about what led Sears to file for bankruptcy.]

Founded shortly after the Civil War, Sears was once the nation’s largest retailer. But it has been in a precipitous decline for years, losing ground to Amazon and Walmart as consumers moved their spending online and mall-based chains suffered.

It is unclear how Mr. Lampert plans to turn Sears around. The company filed for bankruptcy in October, as its sales stalled and its debt payments mounted.

Mr. Lampert, who took control of Sears in 2005 when it merged with Kmart, was the company’s largest shareholder and lender through his hedge fund, ESL Investments.

Some creditors have criticized Mr. Lampert for making deals, including selling some of the company’s most valuable real estate and the Lands’ End brand, that have benefited his hedge fund while harming Sears in the long run.

Mr. Lampert has countered those arguments by saying in interviews that his investments in Sears have hurt him financially.

Even without Mr. Lampert’s financial engineering, analysts acknowledge that Sears would still probably struggle to compete against more innovative retailers with greater resources.

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