Sears chairman’s deal to save company faces opposition from creditors
Sears’ unsecured creditors have filed an objection to the deal proposed by chairman Eddie Lampert to save the bankrupt retailer through his hedge fund ESL Investments.
The committee of creditors filed its objection with the Southern District of New York Bankruptcy Court on Thursday afternoon and requested a public hearing, claiming that it has discovered information which suggests that Sears’ failure was “precipitated by years of misconduct by Lampert, ESL, and others against Sears and its creditors,” in documents cited by CNBC.
“After taking control of Sears in 2005, ESL — acting at all times at founder and namesake Lampert’s direction — engaged in serial asset stripping, taking Sears’s best assets out of the enterprise to shield them from the claims of other creditors and maximize ESL’s investments (in Sears and other entities) in anticipation of these inevitable bankruptcy proceedings,” the filing goes on to explain.
Lampert, Sears’ biggest creditor, has been repeatedly criticized by the retailer’s unsecured creditors for deals done during his tenure as the company’s CEO and largest shareholder since it filed for bankruptcy in October, but managed to win over the department store operator with a bid of $5.2 billion for 425 stores and other assets on Wednesday morning.
In its complaint, the group of unsecured creditors claims that this deal is “nothing but the final fulfillment of a years-long scheme,” and further questions whether Lampert will be able to turn Sears around, stating that he has “failed to set forth a business plan that offers any viable go-forward path.”
Among the activities undertaken by Sears under Lampert’s leadership, the company’s creditors have taken particular issue with the decision to spin off the Lands’ End brand as a separate publicly traded company in 2014 – a company now owned at 67.1% by ESL and its affiliates, according to company financials cited by Business Insider – and transactions with real estate investment trust Seritage Growth Properties, also spun off from Sears Holdings in 2015.
ESL has previously asserted that Sears’ board of directors approved all of the actions undertaken by the retailer at the time that Lampert was serving as its CEO.
The filing made by the group of unsecured creditors also demands compensation for damages incurred by the company under Lampert’s leadership, as well as the recovery of ill-gotten gains.
Sears has until January 29 to respond to objections regarding its deal with Lampert.
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