Shares of Sears Holdings Corp. (SHLDQ, Financial), a retail company, are down 4.05% on Tuesday. The failing retailer’s stock took a hit to start the week when the company was reportedly seeking to pay its executives bonuses totaling $8.5 million, according to court documents relating to the company’s bankruptcy proceedings.
The retailer entered bankruptcy proceedings with the intention of selling and reorganizing its holdings. Some 400 of the most profitable stores were set for reorganization.
Sears is seeking to pay up to $25 million in annual bonuses, and top executives would receive as much as $1 million each. Two plans have been submitted to bankruptcy court. One plan would allow for a maximum of $8.5 million to be dispersed to executives. The second plan includes 322 executives, not considered top executives, that would receive $16.9 million in total bonuses, or about $52,000 per executive.
Employees for the company, many of whome have been with the company for 10 or more years, said that they were originally told that they would receive an eight-week severance package. The employees were then told that due to bankruptcy filings, they would be handed only half of the severance they were promised. Employees that were seeking severance are in shock that executives are set to receive large bonuses.
Cyprus Capital Partners, a hedge fund, is in discussions with Sears to settle a dispute over the company’s plan to raise cash through intercompany debt auctions. The discussions indicate that Cyprus is potentially offering cash to Sears if it agrees not to sell $900 million in notes.
Investors and creditors are eying the holiday season to determine the future of the retailer that has been under increasing pressure from competitors, including Amazon (AMZN, Financial). Sears has been on the decline for years, once being a leader in tools, plumbing and appliances.
The company is planning to sell its highest-performing stores, as proposed on Nov. 2.
Sears needs to have a strong holiday season to fend off liquidation. The holiday season is when retailers make about a third of their yearly sales. Chairman Eddie Lampert has been working on plans to purchase the company out of bankruptcy, but creditors are urging the company to liquidate. Sears employs an estimated 90,000 employees that would all be out of a job if the company folds.
Sears plans to close 180 stores already and the remaining stores must generate enough sales to keep the company alive.
Disclosure: Author has no stake in the listed equities.
