Sears Holdings – Third Time Lucky? Edward Lampert’s ESL Files Revised $5bn Bid, Offer on Table Until 5pm on January 13

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January 10, 2019 –  In a letter dated January 9, 2019 and addressed to Lazard Frères & Co. and filed with the SEC, ESL Investments, Inc. (“ESL”) submitted a revised bid (the “Revised Bid”) detailing the terms upon which it would proceed with a bid at an auction now scheduled for January 16, 2109. ESL values this bid at $5bn and states emphatically that it is a “Qualified Bid” further to procedures agreed by the Court earlier this week. This is the third time that ESL has proposed terms, the first being on December 5, 2018 and the second on December 28, 2018. 
The SEC filing states, “On January 9, 2019, Transform Holdco submitted a revised offer (the ‘Revised Proposal’) to acquire substantially all of the go-forward retail footprint and other assets and component businesses of Holdings as a going concern. The Going Concern Proposal, submitted on December 28, 2018, expired in accordance with its terms on January 4, 2019. Except as modified by the Revised Proposal, the terms set forth in the Going Concern Proposal are incorporated by reference into the Revised Proposal. 
Pursuant to the oral rulings of the bankruptcy court and the agreements reached among the Reporting Persons, the Debtors and the Consulting Parties (as defined in the Bidding Procedures Order) at the Chambers Conference and the Status Conference before the bankruptcy court on January 8, 2019 (the “Hearing’), the Revised Proposal constitutes a Qualified Bid (as defined in the Bidding Procedures). 
This Revised Proposal includes the assumption of additional liabilities that may increase the total purchase price presented by Transform Holdco in the Going Concern Proposal by over $600 million, which, together with the purchase price set forth in the Going Concern Proposal, would provide aggregate consideration to the Debtors in excess of $5 billion. These additional assumed liabilities include (i) up to $166 million of payment obligations with respect to goods ordered by Debtors prior to the closing of the proposed transactions (but as to which goods Debtors have not yet taken delivery and title prior to closing), (ii) up to $139 million of 503(b)(9) administrative priority claims, (iii) up to $43 million of additional severance costs to be incurred by the Debtors, (iv) all cure costs related to contracts to be assumed by Transform Holdco (estimated to be up to $180 million) and (v) up to $135 million of property taxes with respect to the properties to be acquired by Transform Holdco. 
The Revised Proposal also contemplates the acquisition by Transform Holdco of additional assets that were proposed to be left with the Debtors’ estate under the Going Concern Proposal. 
In connection with the Revised Proposal, Transform Holdco has received updated executed copies of a debt commitment letter from certain lenders with regard to a new asset-based credit facility (the ‘ABL Commitment’), a debt commitment letter from certain Reporting Persons and funds managed by Cyrus Capital Partners with respect to the rollover of certain debt facilities of the Debtors (the ‘Rollover Commitment’), a debt commitment letter from certain Reporting Persons and funds managed by Cyrus Capital Partners with respect to a new secured real estate loan (the ‘Real Estate Commitment’), and an equity commitment letter from certain Reporting Persons (the ‘Equity Commitment’). Upon receipt of the funds described in the ABL Commitment, the Rollover Commitment, the Real Estate Commitment and the Equity Commitment, Transform Holdco will have sufficient funds available to consummate the transactions contemplated by the Revised Proposal. 
Pursuant to the Bidding Procedures Order, and subject to the terms of an escrow agreement between Transform Holdco, Holdings and the escrow agent, certain Reporting Persons have deposited $120 million in cash with the escrow agent selected by the Debtors (which includes a $17.9 million non-refundable deposit described at the Hearing, and is also inclusive of the amounts previously deposited at the time of submitting the Going Concern Proposal). The amounts deposited represent in excess of 10% of the cash component of the purchase price set forth in the Revised Proposal. 
The Revised Proposal shall automatically terminate and be deemed withdrawn at the earlier of (i) 5:00 p.m., New York time, on January 13, 2019, if Debtors have not confirmed in writing to Transform Holdco that an “Auction” pursuant to the Bidding Procedures will be held on January 14, 2019 at which Transform Holdco shall be allowed to participate and (ii) 5:00 p.m., New York time, on January 16, 2019, if Debtors have not confirmed in writing to Transform Holdco that Transform Holdco has been selected as a “Successful Bidder” (in connection with the transaction contemplated by the Revised Proposal) pursuant to the Bidding Procedures. There can be no assurances that the Revised Proposal will be accepted by the Debtors or that any of the transactions comprising the Revised Proposal will be consummated on the terms set forth in the Revised Proposal or at all.” 

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