Here’s How CEO Eddie Lampert Could Survive A Sears Bankruptcy Just Fine

Image courtesy of Nicholas Eckhart

Edward S. Lampert is the manifesto-writing chairman, CEO, and biggest shareholder of Sears Holdings. Lampert’s hedge fund keeps lending the flailing retailer money, but if the parent company of Sears and Kmart doesn’t manage to escape its death spiral, Lampert won’t lose everything.

“Financially he’s moved a lot of levers that have kept this company going longer than some of us thought it could,” a retail consultant explained to USA Today. That isn’t necessarily a good thing, though, since “[with] some of those levers you’re setting the furniture on fire to keep the house alive.”

How much of the company does he own, anyway? USA Today performed an analysis of what Lampert owns of Sears and Sears-derived companies, based on Securities and Exchange Commission filings and other information that Lampert and the company have made public over the years. Most of his investments in Sears Holdings and associated companies are through his hedge fund, ESL Investments.

Of the original company, Sears Holdings Corporation, USA Today calculates that Lampert holds around 48% of the company’s stock, and what he owns has lost about half a billion dollars in value in the last few years. He also holds about $381 million in unsecured debt, for which he would most likely receive nothing if the company did go out of business.

However, Lampert’s hedge fund also holds around $836 million in secured debt, and would be the first in line to be repaid if the retailer did file for bankruptcy. Another half a billion in debt is secured with real estate, which the hedge fund may get instead if Sears Holdings is unable to pay its bills.

The fund also owns parts of businesses that were once part of Sears.

Lands’ End: ESL Investments owns more than half of Lands’ End, which Sears had acquired a few years before Lampert’s takeover. It’s now a publicly traded company, and the 59% stake is worth $360 million.

Real estate investment trusts: Recapturing former Sears Holdings stores is proving to be a lucrative business, and ESL Investments owns 43.5% of Seritage Growth Properties. Depending on local commercial real estate markets, the trust is either leasing former Sears stores back, or taking over all or part of the space for other tenants.

In some shopping centers, Seritage has found it more profitable to kick Sears out entirely, which it has the right to do. At the upscale King of Prussia Mall in Pennsylvania, for example, the Sears store has been replaced with Dick’s Sporting Goods and Primark, a fast fashion retailer from Ireland.

Sears Canada: The company spun off its Canadian cousin, and ESL has an $80 million stake, or around 45% of the company.

Sears Hometown and Outlet: It can be confusing, but these chains are no longer part of Sears Holdings. They were spun off into a separate company back in 2012, and the company franchises the right to open smaller Sears Hometown stores in markets that aren’t large enough to support a full Sears. The stores themselves are owned by local entrepreneurs, but the stores buy Sears merchandise like Kenmore appliances. ESL Investments owns 57% of that business, worth around $45 million.

While we may shed tears for Sears and for the people who work for Sears and Kmart, don’t cry for Eddie. He’ll be okay. He declined to talk to USA Today for their story: We’ll just have to wait for his next mini-manifesto to find out what he’s thinking.