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ESL Investments Proposes Purchase of Sears Assets Including Kenmore

ESL Investments, a primary lender for Sears Holdings, is pushing for the company to monetize its assets—and the hedge fund, which is headed by Sears’ CEO Eddie Lampert, expressed interest in buying them.

On Friday, ESL Investments, which loaned the retail group $600 million in 2017, issued a letter to Sears reiterating its belief that the company “should aggressively pursue a divestiture of all or a portion” its Kenmore, Sears Home Improvement and Parts Direct businesses in order to improve the retail group’s liquidity.

Calling Kenmore “an iconic brand with substantial value,” ESL said it’s prepared to close a deal for the property within 90 days. The fund also said it would purchase the other two businesses for $500 million.

“ESL would like to emphasize that its principal interest is seeing that the Kenmore, SHIP and Parts Direct businesses are divested in the near term at a full and fair value, regardless of whether ESL or a third party is the ultimate buyer, so that Sears is able to improve its debt profile and liquidity position,” the letter stated.

Additionally, ESL said it could purchase Sears real estate, including $1.2 billion of debt obligations associated with it, which it would then lease back to the retailer.

To ensure the transactions were fair, ESL proposes they are overseen by a committee of independent directors. Also, the letter noted that neither Lampert nor Kunal Kamlani, president of ESL and Sears board member, would participate in the discussions.

The leaseback scenario is nothing new for the retail group. Last month, Sears announced it sold four locations in just such a deal. Similarly, it is also attempting to offload 16 other locations in online auctions being managed by Cushman & Wakefield.

In the company’s fourth quarter earnings report in March, Lampert promised to continue to “unlock the value of our assets” and close or improve upon stores that are unprofitable. Sears closed 300 stores in 2017 and announced plans to shutter more than 100 more this year.

Despite consistent updates on the company’s plans to mine its assets and cut costs, the retailer has been mostly mum on how it intends to turn around sagging sales and foot traffic. Sears reported comp sales were down by 15.6% across the Sears and Kmart nameplates during the fourth quarter.