Sears appears to be preparing for a long expected bankruptcy filing

Sears could finally be nearing bankruptcy after years of decline

The committee has been resisting the plan amid concerns that creditors and shareholders would sue over it being too favorable for Lampert.

Both Lampert and the Sears special committee now accept that only a court-supervised process can determine the company's future, one of the sources said.

(If it remains under that threshold for 30 days it could get booted from the NASDAQ stock exchange where it is listed.) Shares of Sears traded at a peak of $144 more than ten years ago. CNBC earlier reported that the company was arranging a bankruptcy loan, known as debtor-in-possession financing. The company faces a $134 million debt payment on Monday.

The company has hired advisory firm M-III Partners LLC to prepare the bankruptcy filing, although the retailer is continuing to consider other options to avoid insolvency, the report said.

Representatives from Sears didn't immediately return requests for comment. While the SPDR S&P Retail ETF (XRT) is up 6.5% year to date, and fellow department stores like Macy's (M), Kohl's (KSS), and Nordstrom (JWN) have climbed more than 30% since the start of the year, Sears has lagged-and how. Those include Sears Home Services and the company's flagship Kenmore brand, which Lampert offered to purchase in August for $400 million. Sears Canada declared bankruptcy previous year. When Toys "R" Us, the largest specialty toy retailer, filed for bankruptcy protection last September, it sought to emerge from it after restructuring its debt and shutting stores.

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Mr. Lampert wants to restructure Sears's debt without filing for bankruptcy protection, because he views bankruptcy as risky for retailers, according to a person familiar with his thinking.

The Hoffman Estates, Illinois-based retailer has posted seven straight years of losses and its sales have not grown since the 2008 financial crisis. Sears warned it could go out of business as it waits for approval from the committee on the deal.

Since rescuing Kmart from bankruptcy and combining it with Sears in 2005, Mr. Lampert has closed hundreds of stores and sold off divisions as the business faltered. ESL Investments, the hedge fund managed by Sears CEO Eddie Lampert, said in a filing last month that the debt coming due was among the obligations creating "significant near-term liquidity constraints" for the company.

He also called on the company to sell off $3.25 billion in real estate and assets.

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