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Sears Files for Chapter 11 Protection

Sears Holdings Corp. filed for chapter 11 protection today with a plan to close 142 more stores, Reuters reported. The chapter 11 filing to reorganize debts of the parent of Sears, Roebuck and Co. and Kmart Corp. follows a decade of revenue declines, hundreds of store closures, and years of deals by billionaire Chief Executive Officer Eddie Lampert in an attempt to turn around the company he bought in 2004. Lampert had pledged to restore Sears to its glory days, when it owned the tallest building in the world and companies that included a radio station and Allstate insurance. But the company has not turned a profit since 2011, and critics say Lampert let the stores deteriorate over the years, even as he bought the company's stock and lent it money. It has sold off the legendary Craftsman brand and is considering an offer from Lampert for the Kenmore appliance name. The company listed $6.9 billion in assets and $11.3 billion in liabilities in documents filed in the U.S. Bankruptcy Court in the Southern District of New York. Read more. 

For much of the 20th century, Sears Holdings Corp. defined American retailing with catalogs and department stores that brought toys, tools and appliances to millions of homes. By the time Sears filed for bankruptcy, the once-great company was shriveled and sickly, according to a Wall Street Journal commentary. Decades earlier, it had been dethroned by Walmart Inc. as the biggest U.S. retailer. Then it was crippled by a chief executive with unorthodox strategies, and Amazon.com Inc., an endless online catalog that sucked profits out of the business, according to the commentary. For much of its 125 years, Sears was a pioneer, launching brands like Kenmore appliances and Craftsman tools. It shipped a catalog to nearly every U.S. home and created its own credit card to spur sales. After World War II, it followed people to the suburbs, helping build the malls that moved retailing away from Main Street. It was the first major chain to build parking lots and open its doors on Sundays. Many Americans still live in Sears kit houses, so named because they were purchased via the catalog and delivered in pieces by railroad. Sears’s reach went beyond selling homes and the things Americans put inside them. It created Allstate Insurance Co. and the Discover credit card. In Chicago in 1973, it opened the 110-story Sears Tower, then the world's tallest building; it was renamed the Willis Tower in 2009. Read the full commentary. (Subscription required.) 

Trustee for Bankrupt Bikram Yoga Business Seeks Approval to Subpoena Founder’s Family

The ex-wife and two children of Bikram Choudhury, founder of the bankrupt yoga business and “hot yoga” technique that bear his name, could be subpoenaed by a court-appointed chapter 11 trustee who is seeking more information about the company’s assets, <em>WSJ Pro Bankruptcy</em> reported. On Thursday, the trustee for the chapter 11 proceedings of Bikram Choudhury Yoga Inc., asked the U.S. Bankruptcy Court in Santa Barbara, Calif., for approval to issue subpoenas to Rajashree Choudhury, the former wife of Bikram Choudhury, and two children, son Anurag and daughter Lajwanti, to testify and to turn over documents. Last November Bikram Choudhury Yoga, Bikram’s Yoga College of India LP and three related entities filed for bankruptcy in the face of legal judgments totaling $16 million related to alleged sexual misconduct or a hostile work environment.

Delinquency Spike Forecast for Hurricane-Hit Areas

In the wake of Hurricanes Michael and Florence, lenders can expect a spike in mortgage delinquencies from Virginia to the Florida panhandle, Credit Union Times reported. Two studies released this week found mortgage delinquencies rose significantly this past summer in parts of Texas and Florida hit by hurricanes a year ago. “A decade after poorly underwritten mortgages triggered a housing market crash, it’s clear that the foreclosure risk associated with those problem mortgages has faded,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “The biggest foreclosure risk in today’s housing market comes from natural disaster events such as the twin hurricanes of a year ago,” he said. The ATTOM U.S. Foreclosure Market Report released on Thursday shows forecloses were started on 177,146 U.S. properties in the three months ending Sept. 30, down 6 percent from the previous quarter, down 8 percent from a year ago and reaching the lowest level since the fourth quarter of 2005. The number of starts was 36 percent below pre-recession average of 278,912 properties per quarter. Also the percentage of foreclosure starts tied to mortgages originated from 2004 to 2008 was 44 percent, down from about 75 percent in 2012.

Relativity Media’s Bankruptcy Saga Coming to a Close

Relativity Media LLC finalized the sale of its remaining assets to a senior lender, closing the book on founder Ryan Kavanaugh’s repeated efforts to revive the twice-bankrupt Hollywood studio, WSJ Pro Bankruptcy reported. Bankruptcy Judge Michael Wiles, who oversaw Relativity’s bankruptcies, signed off on the sale in August, after the studio hammered out settlements resolving more than a dozen objections to the transaction. The purchaser, UltraV Holdings LLC, agreed to swap $40 million in debt and to take responsibilities for other of Relativity’s liabilities in exchange for the studio’s primary assets, which include a lucrative distribution deal with Netflix Inc. “The sale of Relativity Media to UltraV is now closed,” said Colin Adams, a managing director at M-III Partners LLC who is serving as Relativity’s chief restructuring officer. “This is a major accomplishment for the estate and we’re looking forward to confirming a liquidating plan that will provide significant distributions to Relativity’s unsecured creditors.” UltraV is composed of funds backed by Sound Point Capital Management, a New York asset management firm with $17 billion of assets under management, and RMRM Holdings, which is led by David Robbins and Lex Miron, who have backgrounds in media and technology.

Companies With Newly Flush Pensions See Chance to Unload the Risk

Pension consultants say that U.S. corporate pensions are at the highest funded level since the financial crisis, which could lead more companies to turn over to insurers the responsibility for paying retirees, the Wall Street Journal reported. Higher funding levels mean corporate sponsors get a better deal when transferring retiree obligations to insurers, so many firms are finding this to be the perfect time to transfer the risks associated with carrying pension plans. Defined-benefit pension plans of S&P 500 companies were in aggregate 91 percent funded at the end of September, according to research released Monday by Goldman Sachs Asset Management. That is the highest level since the end of 2007, when these plans were 108 percent funded, according to the report. Nearly one-quarter of the plans are now either fully funded or overfunded, the report said.

Steinhoff Requests One-Month Lock-Up Agreement Extension

Steinhoff International Holdings NV said it has asked creditors to agree to an extension of the lock-up agreement, delaying it to Nov. 20 from Oct. 20, Bloomberg News reported. “We have continued to receive significant support from creditors under the lock-up agreement and we remain in positive discussions with them,” Danie van der Merwe, acting head of Steinhoff, said today. “Negotiations on the implementation documentation are now well advanced and the one-month extension to the long stop date will give us the necessary time to complete that process ahead of any necessary restructuring processes being launched.” As part of a broader restructuring Steinhoff’s U.S. Mattress Firm unit has become a subsidiary of Steinhoff Europe, the retailer said in the statement. Mattress Firm went into bankruptcy earlier this month.
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