Sears desperately needs money to keep it afloat during bankruptcy. And now the deadline is getting tighter.
The retailer, which filed for bankruptcy on Oct. 15, has already gotten a $300 million loan to help fund its operations while it tries to reorganize. It warned the day it filed that it would need an additional $300 million loan within weeks or else its ability to stay in business would be “seriously jeopardized.”
But now Sears has postponed a hearing that was set for November 1 to win bankruptcy court approval of such a loan, according to a court document filed Wednesday. No new meeting date was set.
Sears declined to comment on the delay.
A hedge fund owned by Eddie Lampert, who is also Sears chairman and majority shareholder, was expected to lead financing of the $300 million loan.
CNBC reported Thursday that Lampert is looking to ensure that his hedge fund would get paid back first when it comes time for Sears to reimburse its creditors. Specifically, Lampert wants his ESL Investments hedge fund to have the same status as major banks like Wells Fargo and Citigroup that provided the initial $300 million loan, CNBC reported.
Meanwhile, Sears is bleeding money. It said it is burning through cash at a rate of $125 million a month, according to its first-day filings.
The 132-year-old company has been struggling for several years and is already drowning in debt. It was forced to file for bankruptcy when it came time to make a $134 million debt payment but didn’t have the cash.
Lampert, who gave up the CEO role at Sears as part of the filing, has been loaning money to Sears for years. But he has always taken steps to ensure that his loans are backed by hard assets, such as real estate or credit card balances, to improve his chances of having the loan repaid even in the case of bankruptcy. Even if Sears liquidates, he’ll end up holding real estate worth hundreds of millions of dollars.
Lampert is the company’s largest creditor. He’s owed at least $2.6 billion.