Vendors of Old Sears are pushing for a liquidation of Sears Holdings Corp., but it’s not anything vendors of New Sears have to worry about.
The operating assets of Old Sears, or Sears Holdings, were sold to Transform Holdco in February in a deal valued at $5.2 billion. That court-approved sale moved the operating assets of Old Sears–the Sears and Kmart nameplates and the store locations that were part of the deal–out of the bankruptcy framework and into new ownership. While Eddie Lampert and his hedge ESL Investments are still the owners, they actually acquired the assets for placement into a new legal entity named Transform Holdco, which is not part of the bankruptcy proceedings of Sears Holdings.
Sears filed its voluntary Chapter 11 petition nearly a year ago on Oct. 15, 2018.
So what exactly is the battle at Old Sears?
When Sears filed its bankruptcy petition, it essentially created a debtor’s estate that continued on in bankruptcy court and serves to handle all administrative claims. That includes unsecured creditors claims, largely unpaid vendors whether for goods or services.
A reorganization plan was on the agenda for court approval this week, but a group of nearly 70 vendors–including many overseas apparel and accessories firms–who shipped to Old Sears are pushing for a Chapter 7 liquidation of the estate.
They’re arguing that the reorganization plan leaves an open-ended timeframe for when they would get paid. Because many of them are close to bankruptcy themselves as they’ve yet to see a dime from Old Sears, the vendors would rather see the estate liquidated so they can receive payment on their claims now as opposed to a promise for some point in the future.
U.S. Bankruptcy Court Judge Robert Drain in White Plains is expected to rule on the request this week. But even if he rules in favor of the vendors, a liquidation of Sears Holdings would have no impact on New Sears or Transform Holdco.