Sears plans to unload pensions and close more stores

By Kate Gibson

/ MoneyWatch

The fall of Sears

Eddie Lampert's $5.2 billion offer to buy what's left of Sears is drawing fire from the bankrupt retailer's creditors as well as current and former employees.

The judge who will determine whether to approve Lampert's bid for the retailer, which the billionaire investor still chairs, is hearing from creditors who oppose the deal. That includes the government entity that guarantees pensions when an insured plan closes without enough money to cover benefits.

The Pension Benefit Guaranty Corp., or PBGC, filed a lawsuit Friday seeking to take over the retailer's two pension plans, which cover 90,000 people. The plans are underfunded by an estimated $1.4 billion, according to the agency.

Lampert and his hedge fund, ESL Investment, seem willing to relinquish the liability, as they made clear in a court filing on Friday. ESL's business plan would have Sears emerging from bankruptcy in better fiscal shape because it will no longer be shouldering about $4 billion in debt and pension obligations, the hedge fund stated.

The PBGC represents a potential hurdle to Lampert's proposal because under his watch Sears entered arrangements that gave the agency liens on assets that ESL wants to void.

Former Sears exec says retailer has been on "death spiral" for decade

More store closures

ESL's future business plan "essentially allows for them to terminate three stores per month, and based on the court testimony, it's unclear what will happen to those employees," said Alex Brozman, a legal analyst at Reorg, a provider of financial and legal information. "The judge is very focused on what happens to the remaining employees at the company, and the public is as well," said the analyst.

"Eddie Lampert pitched his bid as him being a savior stepping in and saving 45,000 jobs, but as things become more clear, that is not entirely accurate."

ESL reiterated that its offer is the sole "long-term opportunity to save and create jobs," a spokesperson emailed. "We intend for the new company to operate as many Sears and Kmart stores as reasonably possible, including new smaller stores that emphasize our stronger capabilities. Continuing to operate a meaningful network of stores is essential to achieving our goal of returning Sears to profitability."

On Thursday, the bankruptcy court is expected to hear additional testimony about the business plan. "There are so many outcomes that could happen, bankruptcy is such an ongoing state of negotiation," said Brozman.

How Sears went from innovation to bankruptcy

A push for severance

The judge is also being asked to meet with a group of current and former Sears and Kmart workers who hope to push for concessions from the retailer. Organized through the labor group Rise Up Retail, workers in a letter called on the judge to protect their interests with steps including severance for those who've been laid off.

Sears could have regained its feet up until 2005, after five years of being poorly run by Alan Lacy, whose crowning act was turning it over to Lampert, said Mark Cohen, the former CEO and chairman of Sears Canada and current director of retail studies at Columbia University's business school.

In Cohen's view, Lacy is the real villain in the once mighty retailer's demise, while Lampert is "just a financial pirate."

As things stand, the judge will determine whether Sears liquidates its remaining 425 stores immediately or the process is drawn out another year or so as Lampert continues a 13-year reign of stripping Sears of its assets, said Cohen.

Creditors have so far refused to agree to Lampert's demand that he and ESL be held harmless from future litigation, another potential stumbling block in the process.

"He's as guilty as you can get," said Cohen, "but maybe not in a court of law, and that's the difference."

First published on February 6, 2019

© 2019 CBS Interactive Inc.. All Rights Reserved.

Sears plans to unload pensions, close more stores

Billionaire investor Eddie Lampert's commitment to saving jobs is questioned in bankruptcy court

updated 18M ago

Family friend has "no doubt" that Jayme Closs will recover

Jayme's alleged kidnapper to face a judge in person for the first time on Wednesday

updated 25M ago

How much income you need to be in the 1%

Despite the furor over proposals to hike taxes on the rich, only a small fraction of Americans would be affected

updated 31M ago

Trump lays out agenda to divided Congress in second State of the Union

The president implored lawmakers to "break decades of political stalemate" and "heal old wounds" just weeks after the shutdown

updated 40M ago

Parents after cop who mistakenly shot son isn't charged: It was "murder"

They want justice after EJ Bradford Jr.'s death; demonstrators burned American flags after it was announced that officer won't be charged

updated 39M ago

Vice president defends Trump on government shutdown

Mike Pence tells CBS News' Jeff Glor that he couldn't guarantee there won't be another partial government shutdown

updated 27M ago

Trump lays out agenda to divided Congress in second State of the Union

The president implored lawmakers to "break decades of political stalemate" and "heal old wounds" just weeks after the shutdown

updated 40M ago

State of the Union: Holocaust, Pittsburgh massacre survivor serenaded

On Judah Samet's 81 birthday, the chamber erupted in bipartisan applause and sang "Happy Birthday" to him

1H ago

Trump promises to "defeat AIDS." His critics are skeptical

President Donald Trump announced that he planned to eradicate HIV/AIDS during his State of the Union address on Tuesday night

7H ago

Fact checking Trump's State of the Union

Here's a look at the president's claims on foreign and domestic policy

7H ago

Why Vietnam for the next Trump-Kim Jong Un summit

The U.S. and North Korea have agreed on the small communist nation for reasons including security and symbolism

1H ago

Trump says he'll meet with Kim Jong Un in Vietnam at end of February

The two-day summit would be the second one between President Trump and the North Korean leader

9H ago

Dinosaur that used spiny back to defend itself found in Patagonia

The new species of dicraeosauridae, christened Bajadasaurus pronuspinax, was revealed in scientific journal Nature

16H ago

Liam Neeson says he's "not racist" after disturbing interview

Neeson, 66, joined ABC's "Good Morning America" to further explain his controversial comments

13H ago

How Venezuela's crisis could harm an entire generation of children

Former U.S. ambassador to Japan Caroline Kennedy says the world has a stake in helping kids weather this political crisis

17H ago

More than 1M Patriots fans celebrate team's 6th Super Bowl win

New England Patriots​ and more than 1 million fans celebrated the team's victory in a celebratory parade down the streets of Boston

12H ago

Oscars aim for "brisk" 3-hour show without a host

The Academy Awards will officially forgo an emcee after Kevin Hart pulled out amid controversy

13H ago

Liam Neeson says he's "not racist" after disturbing interview

Neeson, 66, joined ABC's "Good Morning America" to further explain his controversial comments

13H ago

Steven Tyler opens "Janie's House" to help abused girls

The house is named after "Janie's Got A Gun," which is about an abused girl getting revenge on her father

17H ago

Angie Thomas' new novel is for kids who see themselves in hip-hop

Angie Thomas’ debut novel, “The Hate U Give,” just celebrated its 100th week on the New York Times best-seller list

17H ago

Snap reports record revenues, but struggles to add users

Struggling social media company gets a badly needed boost in growth, while its losses narrowed

14H ago

Dinosaur that used spiny back to defend itself found in Patagonia

The new species of dicraeosauridae, christened Bajadasaurus pronuspinax, was revealed in scientific journal Nature

16H ago

Facebook messenger rolls out unsend feature

After Facebook came under fire for letting Mark Zuckerberg alter message history, it gave all users an "unsend" option

15H ago

What happened when I asked Alexa and Google Assistant for my data

As smart home devices become increasingly popular, concerns about data collection aren't going away

14H ago

Crypto company out $137M after passwords die with owner

The founder's widow said "repeated and diligent searches" for a password have failed

Feb 4

Study reveals top reason people use medical marijuana

More than 30 states now allow marijuana for dozens of health problems if a doctor approves

14H ago

7 steps for heart health may also help with diabetes

New research shows these lifestyle habits can significantly reduce the risk of both heart disease and diabetes

17H ago

Women's brains appear "years younger" than men's, study finds

New research offers clues as to why women tend to outlive men and stay mentally sharp longer

11H ago

Pot for pets? Cannabis products marketed for animals

Some animal lovers are giving the supplements a try, but experts caution they aren't necessarily a good fit for every pet

Feb 4

3rd poultry firm recalls chicken on fears of tainted goods

Pilgrim's Pride recall follows Tyson and Perdue moves to stop sales of food possibly tainted with extraneous material

Feb 4

Sears plans to unload pensions, close more stores

Billionaire investor Eddie Lampert's commitment to saving jobs is questioned in bankruptcy court

updated 18M ago

How much income you need to be in the 1%

Despite the furor over proposals to hike taxes on the rich, only a small fraction of Americans would be affected

updated 31M ago

It's tax season — prime time for hackers and scammers

Every year, the crooks add new weapons to their arsenals, all aimed at separating you from your money

updated 27M ago

Snap reports record revenues, but struggles to add users

Struggling social media company gets a badly needed boost in growth, while its losses narrowed

14H ago

How to avoid common financial mistakes

CBS News business analyst Jill Schlesinger provides practical advice that will help you become more financially savvy

17H ago

Sandusky to be re-sentenced for child molestation conviction

Jerry Sandusky​ lost a bid for a new trial Tuesday, but a Pennsylvania appeals court ordered him to be re-sentenced for a 45-count child molestation conviction

14H ago

Nurse accused of assaulting patient pleads not guilty

Nathan Sutherland is accused of raping a patient at Hacienda HealthCare

17H ago

Va. state trooper, drug suspect shot to death during home search

Authorities say suspect fired at officers who entered a home to look for drugs, killing trooper, and officers then shot suspect

Feb 5

Lawsuit alleges "inhumane" conditions in cold Brooklyn jail

A lawsuit filed Monday says a weeklong power failure at a federal jail in New York City caused "inhumane conditions" for inmates

Feb 4

Judge lets church shooting victims sue gun retailer

Families of those killed in the 2017 massacre in Sutherland Springs argue Academy Sport & Outdoors is liable

Feb 4