What happened

Shares of Sears Holdings (NASDAQ:SHLDQ) were climbing again today on optimism that the bankrupt retailer would reach a deal with its Chairman and biggest shareholder and lender Eddie Lampert to sell its assets to Lampert and his hedge fund, ESL Investments. The gains came after Lampert placed a deposit of $120 million yesterday, along with a revised bid of more than $5 billion, including liabilities, to take over nearly all of the retailer's assets.

As of 3:38 p.m. EST, the stock was up 24.5%.

The exterior of a Sears department store with an American flag in front.

Image source: Sears.

So what 

The revised bid from Lampert and ESL, which comes under a newly named organization Transform Holdco, includes taking responsibility for hundreds of millions of dollars in liabilities that were not included in the earlier $4.4 billion proposal, which was deemed insufficient by the retailer's debtors, including landlords and bondholders. The new proposal would have Transform Holdco assume more than $600 million in additional liabilities, including expenses related to property taxes, inventory, and severance.

Debtors have until Sunday, Jan. 13 to decide whether to allow an auction on Jan. 14 for Sears' assets, in which Transform Holdco would participate. They have until Jan. 16 to declare Transform Holdco's bid as the winning bid, or it will be withdrawn.

Now what

Liquidation firms also have expressed interest in Sears' assets and likely would participate in the auction expected on Monday. When rejecting Lampert's earlier $4.4 billion offer, debtors had signaled they'd prefer liquidation, but selling to Lampert clearly would be in the interest of remaining shareholders, as they would likely get nothing in a liquidation.

The drama should finally come to an end on Monday when the expected auction takes place. Either Lampert will take over Sears, in which case he has promised to keep open a core group of 425 profitable stores, or the company will go into liquidation. Lampert concluded his letter saying, "As always, we remain enthusiastic about the continuation of Sears as a going concern and its future potential.

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