Orchard Supply Hardware Stores Corp (NASDAQ:OSH) is preparing to file for bankruptcy as soon as next week, people familiar with the matter told Lauren Coleman-Lochner, Beth Jinks & Kristen Haunss of Bloomberg. The specialty retailer was once a part of Eddie Lampert’s Sears Holdings Corp (NASDAQ:SHLD) before being spun off in December 2011.

Orchard Supply

Orchard Supply’s Debt Burden

Orchard Supply Hardware Stores Corp (NASDAQ:OSH) is also in talks with its lenders to restructure the $261 million of debts and capital lease obligations. The San Jose, California-based company hired Moelis & Co. in October 2012 to help refinance the senior secured debt. Over the past two years, the company has posted a combined loss of $132.8 million. Eddie Lampert’s RBS Partners LP is the biggest shareholder in company with a 21 percent stake as of May 13, according to the company’s regulatory filings.

Orchard Supply Hardware Stores Corp (NASDAQ:OSH) sells products to fulfill the repair, home improvement and maintenance needs of home owners. It operates the business through three business segments: lawn and garden segment, home products segment, and repair and maintenance segment.

Minimum Bidders

Sources told Bloomberg that many parties are competing to be the minimum bidder for Orchard Supply Hardware Stores Corp (NASDAQ:OSH)’s assets. The stock has risen about 40 percent since last week. It rose 3.1 percent to $3.04 yesterday. Orchard Supply Hardware Stores Corp (NASDAQ:OSH) has reached an agreement with its creditors to waive debt agreement breaches since October. They have been consistently extending deadlines to continue negotiations.

On June 3, Orchard Supply said in an SEC filing that restructuring efforts are unlikely to be successful, and may end up in bankruptcy. The Hoffman Estates, Illinois-based Sears Holdings Corp (NASDAQ:SHLD) acquired the company in 1996 for $415 million. In 2005, it sold 205 stake in Orchard Supply to Ares Management LLC, before spinning off the remaining stake in December 2011.

Orchard Supply Hardware Stores Corp (NASDAQ:OSH) shares were down 7.26 percent to $2.30 at the end of Tuesday’s trading session. The company has a market value of $24.93 million.