Sears Bankruptcy Update: Judge May Reject Lampert’s Bid After All

Sears (SHLDQ) is not out of the woods yet, even with a $5.2 billion bid from Chairman Eddie Lampert to save the retailer.

The company is getting pressure from the U.S. government, mall owners, and other creditors looking to block Lampert’s bid in court, USA Today reported. A federal agency that backs corporate pensions is accusing Lampert’s restructuring plan as an attempt to gain ownership of Sear’s Kenmore appliance and DieHard tool brands, according to the outlet.

Lampert is also facing backlash from Pension Benefit Guaranty Corporation (PBGC) because funding wasn’t provided for employee pensions, a promise that was made over the years to protect the company’s 90,000 retirees. Creditors and adversaries also claim that Lampert is capitalizing on the financial woes of Sears as he was receiving up to $220 million annually in loan payments from the company, USA Today reported.

In addition, mall owners are teaming up to fight Lampert’s bid, accusing him of putting together a “scheme” to “steal” Sears and benefit from its downward spiral, the news outlet said.

All parties with stakes in Sears survival or liquidation will argue their case before Judge Robert Drain on Monday in New York. During the hearing, which may last until Wednesday, Judge Drain is anticipated to rule on whether Sears can indeed sell to Lampert or if it will face liquidation.

If Drain decides to reject Lampert’s offer to save Sears, it most certainly will face liquidation as this was the only option on the table. This would affect about 400 stores and 45,000 employees.

ESL, the hedge fund that is financing Lampert’s deal, previously disputed the claims that creditors are making by saying that they are “misleading or just flat wrong.” ESL also said that “all transactions were done in good faith, on fair terms, beneficial to all Sears stakeholders and approved” by a board.

Since its 15-year decline, Sears has closed more than 3,500 stores and cut 250,000 jobs.

Shares of Sears were up 7.53 percent as of 1:06 p.m. EST on Thursday.