Bit by bit, the smart money deserted Edward Lampert.

Michael Dell, David Geffen, George Soros, the Ziff brothers -- by 2012, all of them, and many more, had peeled away.

Not even Lampert’s friends could understand why the hedge-fund manager, once hailed as a young Warren Buffett, clung to his spectacularly bad investment in Sears, a dying department store chain.

Granted, other hedge-fund titans have blown it, from Julian Robertson with US Airways to Bill Ackman with Herbalife. But few have ridden a disaster so publicly, over so many years, with such an iconic brand. It was hubris, many now say, and a failure to follow the investor commandment: get out in time.

Lampert, who lost many millions as Sears Holdings Corp. shares ground down to pennies, kept throwing the company lifelines. From the moment he bought into what was then called Sears, Roebuck & Co., he also maneuvered to protect his financial interests. At times, he even made money. He closed stores, fired employees and, in what will surely be long remembered as the most unseemly element of the saga, carved out some choice assets for himself.

Until, at last, the reckoning. After 13 years under Lampert’s stewardship, Sears finally seems to be hurtling toward bankruptcy, if not outright liquidation. And, once again, Wall Street is wondering what Eddie Lampert will salvage for himself and his $1.3 billion fund, ESL Investments Inc., whose future may now be in doubt.

Plugging The Holes
“He’s been doing a lot of financial engineering, but he’s just been moving around the deck chairs on the Titanic,” said Van Conway, a restructuring expert who worked on Detroit’s bankruptcy. “It looks like he’s played almost a full deck of cards by now.”

For years, bankruptcy court had been accepted by most everyone except Lampert as unavoidable. He refused to give in, proposing a plug-the-holes maneuver just two weeks ago, after years of machinations that kept the basic gears going even as the company was bleeding out.

At 56, he’s still a billionaire. A Sears bankruptcy isn’t likely to change that for the chief executive officer and chairman.

Under the filing the company is said to be preparing for as soon as this weekend, he and ESL -- together they hold almost 50 percent of the shares -- would be at the head of the line when the remnants are dispersed. As secured creditors, Lampert and the fund could get 100 cents on the dollar, along with others in the protected camp, including Wells Fargo & Co. and Citigroup Inc.

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