Sears has made it out alive.
The beleaguered retailer’s $5.2 billion sale to chairman Eddie Lampert through his hedge fund, ESL Investments Inc., has been approved by Judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York.
As part of the deal, Sears will be able to keep 425 stores in operation as well as maintain roughly 45,000 jobs. The decision is expected to be made final on Friday.
In his ruling, Drain dismissed arguments made by a committee of unsecured creditors who requested that the court order the liquidation of the department store chain instead of accept the restructuring offer.
Two weeks ago, the group filed a motion exploring a potential lawsuit against Lampert and ESL, claiming that the billionaire executive “worked hard to conceal” an “intricate scheme” to strip Sears of its assets, shutting down 3,500 stores and costing 250,000 jobs as he and his hedge fund collected billions.
“In effect, Lampert and ESL managed Sears as if it were a private portfolio company that existed solely to provide the greatest returns on their investment, recklessly disregarding the damage to Sears, its employees and its creditors,” the filing read. (Sears owes the creditors more than $3 billion.)
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ESL has called these statements “misleading” and “flat wrong.” A spokesperson for the hedge fund said, “We reject the [unsecured creditors’ committee’s] assertions and will vigorously contest their claims concerning these transactions.”
The trial to determine Sears’ future lasted three days, with Drain insisting that ESL’s deal was the only way to save tens of thousands of jobs. Lampert, who has been repeatedly blamed for Sears’ downfall, was not in attendance. (He remains its largest investor, with ESL loaning the business more than $2.4 billion in financing over the last several years.)
Once among the most dominant retailers in the nation, the 126-year-old company filed for bankruptcy in October after failing to turn a profit since 2010. It joins a roster of high-profile bankruptcy victims, including Toys R Us and Bon-Ton, that suffered amid digital disruption and changing consumer behavior.
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