What does Eddie Lampert really want with tattered old Sears?

Hedge fund investor Eddie Lampert's determination to plunk down more than $5 billion to buy Sears Holdings -- a husk of the company he controlled for 15 years before it went bankrupt in October -- raises a simple question: Why? 

After all, the 126-year-old retailer is decades past its prime, while bringing it back to life would almost certainly cost billions more. And Lampert hardly seems like a natural candidate to lead that revival, given Sears' grueling descent during his tenure as chairman, chief executive and largest investor.

"Despite repeated promises, Lampert has not managed to turn Sears round -- indeed, performance has drastically deteriorated under his watch," Neil Saunders, managing director for retail at GlobalData, told CBS MoneyWatch. "Instinctively, he's not a retailer." 

That didn't stop the billionaire and his hedge fund, ESL Investments, from casting their latest offer in bankruptcy court last week as the "only way to preserve tens of thousands of jobs" and to keep "an iconic fixture in American retail" alive.

"Every reason to fight for its future"

"For as long as I have been involved with Sears, I have cared deeply about the company, its associates and the people they serve," Lampert said in a statement sent through ESL to The Associated Press. "While the opportunity I saw from the start for Sears to benefit from the disruptive changes in retail and technology has not worked out so far, it is still there to be taken. Every transformation involves perseverance and risk, but I am hopeful that we can execute better and faster on the smaller platform we are bidding on. ... There is every reason to fight for its future."

Despite that noble sentiment, Lampert's record at Sears Holdings raises plenty of red flags, not the least of which has been his penchant for extracting personal profit from the company even as it continued to fade.

Sears may learn its fate on Monday when a bankruptcy court holds an auction that effectively comes down to a contest between Lampert and companies eager to sell the company for scrap. The announcement of the winning bidder or bidders isn't expected until Jan. 16, and creditors and other parties then have eight days to challenge the decision in court.   

Lampert owns 31 percent of Sears' shares, and ESL holds an 18.5 percent stake, according to FactSet.

Milking the cash cow

Sears and its Kmart chain have lost a total of $11 billion since 2012. Despite those losses, Lampert (who remains chairman but relinquished his CEO title after the retailer went bust) has pocketed nearly $1.4 billion from his investment in the retailer, Institutional Investor recently calculated. Most of those profits came from performance fees ESL investors paid to Lampert on his Sears and Kmart investments. 

Saunders' take is that Lampert, as a big lender to Sears, wants to keep the business going to generate more cash -- money that would help pay down debts owed to his other business interests. "There is also a property play as Lampert is a Sears landlord, so if the company keeps going, he can collect rent on some of the stores," Saunders added.

Four years ago, Sears created a real estate investment trust to extract revenue from its properties. It sold and leased back more than 200 properties to the REIT, in which Lampert is a significant stakeholder.

Conflicting roles

Part of ESL's offer involves forgiving $1.3 billion of Sears debt that Lampert holds, a stipulation challenged by a committee representing many Sears creditors. That arrangement highlights a potential conflict of interest because Lampert's financial incentives as a Sears creditor and lender may be starkly different than those as a shareholder, much less the person charged with resuscitating the company.

"He was their CEO, lender, landlord, vendor and largest equity holder," said Philip Emma, a senior Debtwire analyst and an expert in retail bankruptcies. "It's unusual that you have one individual that has played so many roles in a bankruptcy case."

Another example of how Lampert's multiple roles at Sears muddy the water: His $5 billion buyout offer is conditioned on capping his liability if shareholders, creditors or other parties decide to sue. That could amount to a "get out of jail free" card given that some creditors think Lampert may be liable for what they see as some self-serving deals before Sears declared bankruptcy.  

Specifically, creditors argue that Lampert's debt forgiveness shouldn't be part of any deal because he loaned Sears the money when he was CEO, and they claim that the terms unduly benefited him and ESL instead of Sears. 

Lampert contends that the loans were above-board and necessary to keep the retailer running. "ESL's actions have always been taken in good faith, on fair terms, alongside third parties, regularly reviewed by independent and experienced advisers, and beneficial to all Sears stakeholders," the hedge fund said in a filing with the bankruptcy court. Lampert, through ESL, did not respond to an interview request.

Stuck in the '70s

Over its decades-long decline, Sears has shuttered more than 3,000 stores and slashed its workforce from 350,000 to roughly 68,000. Today, Sears and Kmart operate just over 500 stores. Lampert's proposal involves keeping 425 running, at least for a while.

If experts like Saunders doubt Lampert can save Sears, some former company executives do, too. "The company has been on a death spiral for well over a decade," former Sears executive Mark Cohen said in a recent interview with "CBS Sunday Morning."

"There is so much broken with Sears that I doubt it can be fixed. It really stopped being a viable retailer a long time ago," Saunders said. "The retail market is now entering 2019, and things are moving very fast in terms of channels, digital and the way business is done. Sears is still stuck somewhere in the 1970s."

Added Debtwire's Emma, who noted Lampert isn't known for putting much of his own skin in the game: "There has to be some level of investment to keep it going, unless something changes with the status quo of how it's run."

-- The Associated Press contributed to this story