UPDATE: October 12, 2018: Sears is negotiating a plan with lenders that would allow it to keep operating through the holiday season rather than immediately liquidating, according to reports in CNBC, which first reported the news, and Bloomberg that cited unnamed sources. Both reports noted Sears would keep "some" of its 900 stores running. According to CNBC, "The goal would be to stay open until at least Christmas with a hope of finding a buyer while Sears is in bankruptcy." Reuters reported later Friday that Sears is looking to close up to 150 stores in the process. The plan would also include bankruptcy financing of $300 million to $500 million, Bloomberg reported. Details of the plan are still being negotiated and the plan is not final.

Dive Brief:

• Sears Holdings CEO Eddie Lampert is mulling a bid for some Sears assets and business units in bankruptcy, according to a Reuters report that cited unnamed sources.
• Among those assets are the Kenmore appliance brand, Sears' home improvement unit and certain real estate, according to the report. Lampert previously made an offer to Sears for the Kenmore and home services businesses, and urged the divestment of some owned real estate in a recent proposal to restructure and reduce the company's debt load.
• Reuters noted in this scenario Sears would "initially avoid an outright liquidation, but would have to navigate the bankruptcy process without some of its key assets." The news service also reported that Sears, at the same time, is considering a traditional reorganization in Chapter 11. Meanwhile, the Wall Street Journal reported Thursday that some major banks are urging Sears to liquidate in Chapter 7 rather than reorganize.

Dive Insight:

A Sears bankruptcy filing seems all but certain at this point. The outcome of bankruptcy for Sears, however, is still very much up in the air. But few if any observers would be surprised to see Lampert make a play for some key Sears assets, given the executive's deep and complicated financial relationship with the retailer he manages and controls.

Multiple news outlets have reported the retailer is working with advisers and banks to prepare a filing and financing for Chapter 11 as a $134 million debt payment comes due on Monday.

The Journal and Reuters both reported that Lampert, who has loaned Sears hundreds of millions of dollars through his hedge fund, ESL Investments, refuses to bail the retailer out this time so it can make its debt payment. Reuters noted that Lampert won't loan Sears any more money unless the board accepts his restructuring plan offered in late September, which so far the board has not. Meanwhile, the retailer has already missed payments to vendors, according to a Reuters report from Thursday.

If and when the filing comes, expect a complicated and potentially contentious court process. As Philip Emma, a retail analyst with Debtwire, told Retail Dive this week, Lampert wears five Sears-related hats: CEO, majority shareholder, major lender, landlord (through the Seritage Growth Properties real estate spinoff that Lampert chairs and co-owns) and a supplier to Sears (through his investments in Lands' End).

The potential for conflicts of interest among those roles could be a target for litigation in a Chapter 11 case, according to attorneys Retail Dive spoke with.

Lampert's reported interest bidding for Kenmore and other assets could make a potentially complicated bankruptcy even more complicated. It also leaves open the question of what would become of the rest of Sears' business, and whether there would be much left to salvage, with another of Sears' famed private labels extracted from the business along with Craftsman, which Sears sold last year to try to stem its financial bleeding.

Still, the possibility for a reorganization remains. Emma pointed out that "it's not a foregone conclusion that they don't come out of it with some way to revitalize business." But others see little value in Sears as a retailer, after years of sales declines, staff cuts, asset sales and store closures.

"If [Sears] was profitable at the operating level there may be some hope that after restructuring it could rebuild its assets and pay down further debt," GlobalData Retail Managing Director Neil Saunders wrote this week in emailed comments. "However, this is not the case. … In our view, this is a company that is broken operationally as well as financially."