On Monday, a group of vendors for the bankrupt Sears Holdings Corp. — former parent to the Sears and Kmart department store chains — asked a judge in the United States Bankruptcy Court in the Southern District of New York to reject Sears Holdings’ Chapter 11 reorganization plan and shift to Chapter 7. (The move would effectively spell the end of Sears Holdings.)
In one court filing, the vendors seeking a Chapter 7 liquidation wrote that they were “being pushed closer to insolvency,” as the restructuring plan necessitates that the vendors wait for an unspecified amount of time before being paid in full.
“The time has come for the professionals for the debtors and creditors’ committee to stop wasting the precious, little cash on hand, which rightfully belongs to administrative creditors,” the filing read.
Sears chairman and ex-CEO Eddie Lampert — who, along with namesake hedge fund ESL Investments Inc., took control of the company in 2005 — won a bankruptcy auction early this year, striking a $5.2 billion deal in February that rescued the Illinois-based chain from liquidation, saving 425 stores and 45,000 jobs. Transform Holdco LLC, the firm owned by Lampert’s hedge fund, now owns the business and operations of Sears and Kmart.
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If the court decides in favor of Sears Holdings’ lawyers, the company’s creditors requested that an independent trustee be named to help mediate.
Sears’ parent company filed for Chapter 11 bankruptcy protection on Oct. 15 after failing to turn a profit since 2010. It joined a list of other high-profile retail victims including Toys ‘R’ Us and Bon-Ton as brick-and-mortar mainstays shrink their physical footprints and invest more resources in e-commerce. Last month, Transform Holdco let go of roughly 250 Sears workers at its corporate headquarters and confirmed another round of store closures.
Correction: The headline originally read “Sears Awaits Restructuring Plan Ruling as Vendors Urge Bankrupt Retailer to Liquidate.”
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