With Eddie Lampert prevailing at Sears Holdings' (SHLDQ +0.00%) recent bankruptcy court auction, the troubled retailer won another stay of execution. Lampert's offer to buy the company for about $5.2 billion means that Sears Holdings won't be liquidated immediately. It will keep some 400 stores open, saving as many as 50,000 jobs.

But so far, it is only a provisional agreement. Sears' unsecured creditors oppose the sale and want the retailer to be liquidated instead, according to CNBC.

Creditors have objected to the amount that Lampert is offering to buy the business, which they contend won't come close to covering all of Sears Holdings' debts. They also allege that Lampert engaged in sweetheart deals for his hedge fund ESL Investments and other entities prior to Sears Holdings' bankruptcy filing -- either stripping away valuable assets for his own enrichment or loaning the retailer money that he knew couldn't be paid back -- according to Bloomberg.

Image source: Sears Holdings.

Among the transactions being investigating are the spinoff of Lands' End and the creation of real estate investment trust Seritage Growth Properties. (Lampert, through ESL, is the largest shareholder in both spinoff companies.)

A bankruptcy judge will hold a hearing on Feb. 4 to decide on Lampert's bid and determine if the objections have merit.

Buying at a steep discount

To make his bid more palatable, Lampert improved his offer by $150 million in the final round of negotiations. But like his original offer, the new bid also has Lampert and ESL risking very little of their own money to gain full control of the retailer. 

The $5.2 billion offer has ESL financing part of the takeover by:

• Having Sears take out a new $850 million asset-backed loan
• Forgiving Sears the $1.3 billion it owes ESL, known as a credit bid
• Rolling over $621 million in existing senior debt
• Assuming $592 million in Sears liabilities
• Assuming $166 million in inventory
• Assuming $139 million in vendor and supplier claims

Other controversial provisions, like shielding Lampert from lawsuits arising from whether he made sweetheart deals, were removed.

Lampert will be acquiring the business on the cheap, essentially. Because tens of thousands of jobs hang in the balance, many people are willing to give him the benefit of the doubt.  That apparently includes the bankruptcy judge, who refused to allow Sears and Lampert to walk away from the negotiating table when they reached an impasse earlier this month.

Still in need of a major overhaul

Even if Lampert is ultimately successful and those Sears jobs are saved, it is only a matter of time before the retailer implodes once more. The hedge fund operator has long said that if he could get Sears down to a size where only its best stores were left operating, he could make a profit. But customers have been fleeing the stores in droves, only returning last quarter because Sears was essentially having a liquidation sale. It's not as if that's sustainable.

Lampert will also need to modernize the stores if he really wants to save Sears and not just have the chance to pick the very last bits of meat off the retailer's bones. Modernizing is something he has been loath to do from the time he acquired the chain, once noting that customers didn't care about fixtures and decor.

To his credit, Lampert did update one store last year with a store-of-the-future concept. It was a design that was 10 years too late to save Sears from its current predicament, but if Lampert were to continue in that vein, he might be able to pull off the unimaginable.

However, his track record on that point is not enviable. And in any case, Lampert still needs to get past objections by creditors who want to maximize the amount of money they recover. So it's not a foregone conclusion that he will acquire the company -- meaning that Sears Holdings may have been spared only temporarily.

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