Sears may be days away from bankruptcy

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The Wall Street Journal quoted sources saying Lampert wants to restructure and is anxious that a bankruptcy filing will lead to a liquidation, which has happened with so many retailers, the most recent being Toys R Us. Sears Holdings (SHLD) stock ended 17% lower Wednesday. For example, he recently offered to buy its Kenmore appliance brand for $400 million.

Sears has hired advisers to prepare a possible bankruptcy filing that could come as early as this week, according to the Wall Street Journal. Still, the possibility of Sears' demise has loomed for months, and people familiar with the arrangement told the Journal that Sears is still weighing other options.

Sears revealed Tuesday night that investor Bruce Berkowitz of Fairholme Capital Management dumped 142,000 shares of Sears in the last few days, for only 59 cents to 65 cents a share.

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The report comes hours after Sears announced it had added a restructuring expert to its board. CNN reported that while that sell-off represented only 8 percent of the investor's holdings, he could be cutting his losses since "shareholders are typically wiped out in bankruptcy". That kind of loan is used by companies that file for bankruptcy to fund operations during the process. It could attempt to emerge as a profitable company.

But many flailing retailers have tried that tactic before and failed (see: Toys "R" Us).

The world's largest retailer in the 1960s, Sears sold everything from toys to auto parts to mail-order homes and was a key tenant in nearly every big mall across the United States. "Like many other brick and mortar retailers, Sears has encountered very substantial obstacles to profitability as a result of the enormous changes to the retail environment caused by the ever-increasing trend to online shopping". Sears wants to reduce its debt load by 80%, hoping creditors will bite at the chance to make a deal while the company is still a going concern.

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In July, Sears closed its last store in Chicago, once its hometown.

"The problem in Sears case is that it is a poor retailer", said Neil Saunders, Managing Director of GlobalData Retail, in a Tuesday research note, where he wrote that he wasn't surprised the retailer was preparing for a possible bankruptcy filing. That's down from 317,000 U.S. employees in early 2006, soon after the merger.

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