Sears: creditors committee objects to asset sale to ESL Investments

By Sarah Lizee

Olympia, Wash., Jan. 29 – The official committee of unsecured creditors appointed for Sears Holdings Corp.’s Chapter 11 case objected to the proposed sale of the company’s assets to ESL Investments, Inc., according to an objection filed Monday with the U.S. Bankruptcy Court for the Southern District of New York.

The committee said that the ESL bid is the result of a flawed process, fails to provide value for unencumbered assets by a dramatic margin and renders the debtors administratively insolvent.

According to the objection, the bid is also premised on an inappropriate credit bid of disputed claims, and releases causes of action worth hundreds of millions of dollars.

The committee also said that the bid is based on an unrealistic business plan that, if approved by the court, will “forestall for only a short period of time the inevitable liquidation of Sears and the cessation of the 45,000 jobs that Sears and ESL assert will be saved in connection with the ESL sale.”

As previously reported, a hearing for the approval of the $5.2 billion sale of Sears’ assets to ESL will be held on Feb. 4. The company said it will try to obtain court approval of the sale by Feb. 8, with the sale expected to close by Feb. 19.

The assets being purchased include Sears’ “go-forward stores,” which Sears said in an 8-K filing with the Securities and Exchange Commission on Jan. 24 includes roughly 425 retail stores under the Sears and Kmart brands and some related real estate interests.

ESL will also purchase up to $17 million of cash held at the retail stores in question.

The purchase price is comprised of cash equal to $1.4 billion, plus up to $17 million for store cash, plus a $35 million credit bid release consideration, minus the total amount of a credit bid related to the outstanding obligations under a first-in, last-out facility, plus the amount of a credit bid related to $433.45 million in second-lien obligations, plus any FILO facility buyout amount.

The purchase price also includes a credit bid related to an IP/ground-lease term loan facility, the FILO facility, a 2020 real estate loan and the second-lien obligations, as well as debt or equity securities in the buyer in an amount and form to be determined, satisfaction of all junior debtor-in-possession term loan obligations, satisfaction of Citi letter-of-credit facility obligations and the assumption of seller liabilities.

The purchase agreement also states that ESL will provide offers of employment to 45,000 Sears employees and through Feb. 1, 2020, provide salary continuation and comparable benefits, as well as reinstatement of the company’s pre-bankruptcy severance program for all employees that accept the employment offer at the sale closing.

Sears is a retailer based in Hoffman Estates, Ill. The company filed bankruptcy on Oct. 15 in the U.S. Bankruptcy Court for the Southern District of New York under Chapter 11 case number 18-23538.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.