Sears Holdings (SHLDQ) chairman Eddie Lampert was given one last chance to save the retailer after bankruptcy court judge Robert Drain determined "The execution risk for this transaction, when one considers the alternative ... is reasonable to take."

Acknowledging the vilification Lampert has received as he presided over the near-demise of the once venerable department store chain, the judge said, "He has the opportunity now not to be a cartoon character and take action that in fact would be of great meaning" for all concerned. His bid was the only one offering to save the company.

Abandoned store

Image source: Getty Images.

Yet creditors and even employees whose jobs were at stake objected to Lampert gaining control of the company; they charge it was his actions that precipitated Sears' fall into bankruptcy even as he and his hedge fund ESL Investments were enriched. The judge disagreed, saying the hedge fund seemed mostly to operate "in good faith."

Now Lampert gets the chance to prove his critics wrong and follow through on his long-stated belief that a smaller Sears composed of its best-performing stores could actually thrive in the marketplace.

Little of value left

Lampert's $5.2 billion bid for Sears included an $885 million cash payment, though little of it was from Lampert himself. He would also assume $1.8 billion in liabilities and pay off $621 million worth of Sears' senior debt.

In exchange, he will gain control of approximately 425 stores that employ around 45,000 workers, though it's likely it won't remain that many -- ESL's president told the court some 156 stores, or more than a third of those being acquired, were underperforming.

Since Lampert merged Sears with Kmart in 2015, he closed over 3,500 stores and fired more than 250,000 workers. He also sold off some of Sears' best-known and respected assets such as Land's End and Craftsman tools, as well as substantial amounts of real estate, including 235 properties that were acquired by Seritage Growth Properties, the real estate investment trust Lampert created, and of which he and ESL are the biggest shareholders. Lampert also owns large stakes in Land's End and Sears Hometown & Outlet, which was also spun off.

Even a small subset of currently profitable stores may not be enough to save the retailer, because Lampert has to commit substantial financial resources to upgrading them as well as overhauling the company's digital presence, both of which have suffered from his not-so-benign neglect over the years.

So much more to do

It was only recently that Lampert began to reimagine Sears, and then only one store at that. The retail marketplace has dramatically changed in the 15 years since Lampert bought Sears, but he has largely refused to adapt to the new landscape. It's why many doubt his bid to buy Sears was anything more than an effort to pare the last remaining value from the retailer's carcass, even as he remained its largest investor. While his Sears investment may have been impaired, his retention of an ownership position in the assets he sold or calved off have offset the Sears liability.

Sears will be privately held now by Lampert, and we'll only know in time whether his vision was successful or not. It's possible a much smaller Sears can live, but the historical weight of Lampert's stewardship would suggest that the iconic retailer's day of judgment has only been delayed.

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