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Updated to include tweets from Kathy Ireland

For Edward Lampert's beleaguered SearsHoldings (SHLD)  , the outlook may soon change from bleak to broke, according to Fitch Ratings.

Sears has "significant default risk" within the next 12 to 24 months, triggered by years of weak store traffic and high levels of debt, the ratings company said in a report on Wednesday.

"Default risk means most likely a bankruptcy, or a Chapter 11 filing," said one of the report's authors, Sharon Bonelli, in a phone interview, meaning that the company will either have to liquidate to pay back its creditors, or reorganize in bankruptcy court and hope to stay alive by emerging as a smaller entity. At issue for Sears, which is battling declining cash flow amid a prolonged stretch of losses, is repaying some $2.8 billion in high yield bonds and institutional term loans coming due in the next few years. 

Sears' "restructuring risk is high over the next twelve months, as our 'CC' rating would suggest," said Monica Aggarwal, managing director of Fitch's retail team.

Fitch joins Moody's Investors Service in sounding the alarm bell on Sears. Moody's this month slashed its speculative-grade liquidity rating on Sears one notch to SGL-3 from SGL-2. The new rating reflects the likelihood that Sears will continue to need outside financing to stay in business, and that it may require covenant relief to maintain orderly access to funding lines.

Sears was forced to accept $300 million in financing from CEO Edward Lampert's investment vehicle ESL Investments in August.

"We recognize the risks associated with relying on these sources and continued shareholder support to finance its negative operating cash flow which is estimated by Moody's to be approximately $1.5 billion this year," said Christina Boni, a Moody's vice president.

Meanwhile, the sell-off in Sears shares has accelerated since the company released its disastrous second quarter results on Aug. 25 -- shares are down about 20% -- as investors question the chain's viability. 

Second quarter same-store sales at its discount unit Kmart fell 3.3%, representing the seventh straight quarterly decline. Sales were pressed in some of Kmart's most important categories, including pharmacy, groceries and consumer electronics.

As for Sears, it notched its eighth consecutive same-store sales decline as sales fell by 7%. Weakness was felt across the board for Sears, with home appliances, apparel, cosmetics and footwear all showing declines in sales.

Perhaps more concerning than the tumbling sales are dangerously low cash levels for Sears as it gears up for the holidays. Cash and equivalents declined to $276 million from $1.8 billion a year ago.

Sears spokesman Howard Riefs didn't return immediately return a request seeking comment. But, long-time Kmart spokeswoman, model and actress Kathy Ireland voiced her shock on Twitter over TheStreet's report about the possible demise of Sears.