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Eddie Lampert's plan to keep Sears Holdings afloat is intended to sink the unsecured creditors of the retailer, who hope that a federal bankruptcy court in New York will dismiss the offer when it's over. 39, a hearing on February 4.
Lampert's $ 5.2 billion bid to buy the badets of a company out of bankruptcy contains only $ 885 million in cash, while billions of creditors have been extended to Sears on an unsecured basis. The five largest unsecured creditors, including the federal pension guarantee agency, owe $ 5 billion. If the sale is approved, there will remain about 100,000 creditors instead of the old company's business.
The bankruptcy priority rules would determine who will get the first right on all remaining Sears estate after the purchase of 425 stores by Lampert and other badets, including the Kenmore and DieHard brands. Many, like the merchants who usually stand behind senior creditors, will probably find nothing in their turn.
The magnitude of the potential losses on the creditors clearly illustrates the risks of doing business with a bankrupt retailer who is heading towards bankruptcy. The banks lent money and the sellers moved goods to Sears for years, while Lampert struggled unsuccessfully to turn around the 126-year-old retailer's account.
"I'm not sure that there is a similar situation, given the size, scope, and scale of what Sears was and what Sears was, and the amounts invested by them. Creditors creditors and badet purchases (before bankruptcy), "says the bankruptcy lawyer Chicago Marwil, whose firm Proskauer is not involved in the case.
At this point, the best hope of unsecured creditors appears to be a lawsuit over Lampert's relationship with Sears, where he has been the majority shareholder since the merger of Sears and Kmart in 2005, currently holds the position of president and recently held the position of general manager.
"Their recoveries, if any, will result from the litigation regarding what he did with the badets" before Sears filed for bankruptcy protection in October, says Douglas Lipke, a Chicago bankruptcy attorney whose firm Vedder Price represents a few unsecured people. creditors in the case.
Lampert has pledged $ 35 million – just $ 35 million, creditors have complained in bold in a deposit – to get Sears to accept his plan to buy the company with a debt he owns already. At the same time, he abandoned claims that would have protected him from lawsuits for transactions that creditors claim to be interested in and contributed to the fall of Sears.
Unsecured creditors want Sears to test the market for the true value of its badets. The offer of Lampert – a so-called credit offer that had been chosen from among the liquidation companies' offers – would support about half of the $ 2.6 billion that it lent. to the society.
Last month, a committee consisting of nine unsecured creditors petitioned the White Plains, New York bankruptcy court for leave to sue Lampert and his hedge fund. They want the court to "personalize" Lampert's loans to Sears through its hedge fund, ESL Investments, into capital contributions, subordinating them to creditors' claims.
The committee said "hundreds of millions, if not billions" could be made – more than $ 1.8 billion alone from "claims for requalification and equitable subordination". This would improve the chances of creditors recovering someday. They await not only secured creditors but also priority creditors, including tax bodies, post-bankruptcy sellers and employees with salary arrears and benefits.
"Unsecured creditors have little or no chance of recovering in a sales and claims scenario, so the committee is confident that any such recovery should be wagered for the opportunity to recover more in a liquidation scenario. and litigation is a good bet, "says Marwil.
In addition to bond creditors, home appliance manufacturers like Whirlpool ($ 23.4 million) and Frigidaire ($ 18.6 million) are also on the list of unsecured creditors. The most important is the Federal Pension Benefit Guaranty Corp., which said in a recent report it filed claims totaling $ 1.74 billion. The agency is preparing to badume responsibility for Sears' two defined benefit pension plans, which, according to the PBGC, are underfunded by about $ 1.4 billion. The plans have badets of approximately $ 2.6 billion and cover some 90,000 participants.
Two of the nine unsecured creditors are owners of shopping centers: Simon Property Group, based in Indianapolis, owner of Woodfield Mall in Schaumburg and Gurnee Mills, and Brixmor Operating Partnership, a New York-based real estate investment trust. In a bankruptcy court case, ESL stated that the two companies, as owners of many Sears stores, had "an interest in seeing Sears wound up without regard to the interests of other Sears stakeholders."
Simon refuses to comment and Brixmor could not be reached. Another committee member, Apex Tool Group, based in Maryland, with $ 6.6 million in compensation claims, has not responded to the call.
Creditors claimed that a Lampert "grappling with insurmountable conflict" had betrayed Sears, who had once more than three times its current income, through insider trading. These include the disposal of badets to shareholders (ESL being the most important) for an amount that creditors believe to be less than fair market value, and the search for the best Sears locations through which they are sold. a real estate company created by Lampert. Lampert has proposed to buy Sears real estate for $ 1.8 billion if his bid for the company fails.
According to ESL, the unsecured creditors' statements are "misleading or simply false". ESL is a "constant source of funding" for Sears and its "transformation plan," he said. He also described the $ 2.4 billion granted to Sears as "guaranteed".
Sears refuses to comment.
Lipke predicts a long way to go for unsecured creditors – maybe five years – before any legal resolution.
"Nobody is going to know much right now," he says. "Lampert has a great team ready to defend what he's done."
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