Bankruptcy Judge gives Sears another chance and agrees on $ 5.2 billion plan

NEW YORK – A bankruptcy judge on Thursday granted a $ 5.2 billion plan by the president of Sears, the largest shareholder, to maintain this iconic company.

This approval means that approximately 425 stores and 45,000 jobs will be preserved.

The offer of Eddie Lampert through the intermediary of an affiliate of his ESL hedge fund has defeated the opposition of a group of unsecured creditors, including shopping center owners and suppliers, who tried to block the sale and pushed hard for the liquidation of the company.

In rendering his decision, the US Bankruptcy Judge, Robert Drain of the Southern District of New York, rejected the group's badertion that the sales process was unfair and flawed, excluding anyone else who might be interested in buying. of the business and that Sears value to his creditors if he died only if she lived.

But the Toys R Us ghost was an important part of the Sears bankruptcy case. The toy retailer was forced into liquidation last year, just months after trying to reorganize itself in bankruptcy court, cutting 30,000 jobs.

During the hearing, which began on Monday, Drain focused on the spectrum jobs and put the lawyers representing the group of creditors on the defense. Lawyers for Sears and ESL have argued that selling is the best alternative and reinforcing the need to preserve jobs.

Drain should enter her order Friday, making it official.

Even with the latter reprieve, the long-term survival of Sears remains an open question. ESL President Kunal Kamlani shared his vision this week of setting up a network of smaller stores featuring mattresses and major appliances, but details are still lacking.

In fact, William Transier, an independent member of the Sears Board of Directors since October, acknowledged at the hearing that Sears could close an average of three stores per month and sell $ 600 million in real estate over the next three years. . And the company is still facing fierce competition from Amazon, Target and Walmart. This while his stores look old and dull.

"There remain significant hurdles for its long-term business," wrote Christina Boni, an badyst at Moody's department stores, in a note released Thursday. "The scale, which is essential to today's retail competition, will be lacking and the basic proposition of its customer remains in question."

Lampert, which merged Sears and Kmart in 2005, prompted Sears to protect itself under chapter 11 bankruptcy in October. The company's parent company, which also owns Kmart, had 687 stores and 68,000 employees at the time of filing. At its peak in 2012, it had 4,000 stores.

Sears was hit hard during the recession and was not able, thereafter, to keep up with changing consumer trends and powerful rivals. It has not had a profitable year since 2010 and has experienced 11 consecutive years of declining sales.

Lampert's original plan had been rejected by a subcommittee of the Sears Board of Directors. ESL has softened the offer several times before the subcommittee agrees. Lampert also attempted to obtain dispute resolution as part of the transaction to buy back the company. But the subcommittee of the Sears board of directors who oversees the bidding pushed back, and Lampert and ESL can be sued for certain transactions pbaded before the bankruptcy. The Unsecured Creditors Committee maintained the value of these litigations.

The group, which is at the bottom of the list of payments to be paid, has objected to the sale, alleging falsified financial projections, excessive redemptions and trademark spillovers that deprive the company of its core badets.

"The tortured history of Sears reads like a Shakespearian tragedy," the group said. "Lampert and ESL managed Sears as a private holding company that would exist solely for the purpose of maximizing their return on investment, unconsciously ignoring the damage to Sears, its employees and its creditors. "

Lampert personally owns 31 percent outstanding shares of Sears, and its hedge fund has a 18.5 percent stake, according to FactSet. He left his position as CEO in October after holding this position since 2013.

Under Lampert's leadership, the retailer based in Hoffman Estates, Illinois, has survived in part by selling stores and selling well-known brands such as Craftsman tools. He also lent some of his own money.

Lampert has been criticized for not having invested in his stores. Even Senator Elizabeth Warren, Mbadachusetts Democrat and potential presidential candidate, attacked and questioned her commitment to Sears workers.

"I'm concerned that under your leadership, Sears may continue to struggle and that employees continue to face uncertainty and anxiety about their future job, as well as the ongoing risks to their employees. social benefits and their economic security, "writes Warren in a letter to Lampert, made available to the Associated Press by a labor rights group.

One of Lampert's speculative fund lawyers said earlier this week that the 56-year-old billionaire had been portrayed as a mix between J.Gould, the railroad magnate, and Barney Fife, a fictional character from the popular show TV show "The Andy Griffin Show."

Drain, the bankruptcy judge, acknowledged that Lampert had been the subject of "verbal abuse".

"He's a wealthy individual and a big boy," Drain said. "And I guess he can take it."

But he urged Lampert, who was not in the courtroom, to have constant communications with the company and its employees.

Lampert "has the opportunity not to be a cartoon character … he should do it," said Drain.

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Anne D'Innocenzio, The Associated Press