Lampert\'s Hedge Fund Makes Bid for Sears Stores and Assets

Lampert’s Hedge Fund Makes Bid for Sears Stores and Assets

Company’s chairman and biggest creditor seeks to use new borrowings and debt forgiveness to maintain control of struggling chain

A Sears department store with store closing signs at the Grand Teton Mall in Idaho Falls, Idaho, on Nov. 23. Photo: John Roark/Associated Press
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Edward Lampert, the chairman and biggest creditor of Sears Holdings Corp. SHLDQ 3.85% , has made an offer to buy the retailer’s stores and other assets out of bankruptcy court in a bid to keep control of the struggling chain.

Mr. Lampert’s hedge fund ESL Investments Inc. is proposing to buy Sears, its real estate and brands like Kenmore in a deal that wouldn’t rely heavily on cash, and would instead use new borrowings, forgive Sears’s existing debts and roll over the company’s other debts.

In a securities filing Thursday, ESL said the deal was valued at $4.6 billion, mostly from $950 million in new loans, the forgiveness of $1.8 billion in debt and $1.1 billion of assumed liabilities.

The plan would seek to prevent a full liquidation of the roughly 500 remaining stores and keep the embattled retailer operating under Mr. Lampert’s leadership. It would need to be approved by creditors and would have to beat out other bids being prepared by liquidators.

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ESL’s offer includes the brand Kenmore appliance brand and Sears Auto Services, among other entities. ESL said it plans to keep about 50,000 of the retailer’s employees.

The retailer, which filed for bankruptcy in October, received court approval last month to sell at least 400 of its best-performing stores. The company needs to find a top bidder for those stores by Dec. 15. An auction for the stores will be held in mid-January if there are multiple bidders.

ESL was expected to make an offer. Mr. Lampert, who stepped down as CEO when Sears filed for bankruptcy, is the chairman of Sears, as well as its largest shareholder and creditor through his hedge fund.

“ESL Investments continues to believe in Sears Holdings’ immense potential to evolve and operate profitably as a going concern with a new capitalization and organizational structure,” ESL said in a statement.

The hedge fund added that its proposed business plan includes “significant strategic initiatives and investments,” was the only way to save “tens of thousands of jobs” and optimizes value for all stakeholders.

Write to Allison Prang at allison.prang@wsj.com