Friday, January 18, 2019

Sears creditors say the CEO's misconduct is blamed for the company's problems


The creditors filed an appeal to the bankruptcy court of the former Sears CEO for $ 5.2 billion late Thursday. They blamed Lampert for the problems that led to Sears' fall.

The creditors, who together were credited with at least $ 3.4 billion, acknowledged that Sears was hurt by the rise of Big Box rivals and online shopping. However, they claimed that the company's demise "was triggered by years of misconduct by Lampert, ESL and others against Sears and his creditors."

Through its hedge fund ESL, Lampert won an auction for 425 stores and other Sears assets earlier this week. The Judge of the US Bankruptcy Court, Robert Drain, will hold a hearing on February 4 to examine this offer and any objections to it.

"Sears demise is nothing short of tragic," wrote the creditor in the file. They said that the company had undertaken on Lampert's instructions to "Sears & # 39; Remove Best Assets from the Company to protect them from the claims of other creditors ... in anticipation of this inevitable bankruptcy."

The creditors' committee, representing sellers, landlords and others owed by Sears, was already noted in the file, saying that the company should be closed and not live. But signing up is the most direct attack on Lampert and the way Sears was run after he merged it with Kmart in 2005 and took control.

"In fact, Lampert and ESL have treated Sears as if it were a private portfolio company dedicated solely to maximizing returns on its investments and ruthlessly ignoring the damage to Sears, its employees and its creditors," they write ,

A number of loans that ESL had given to Sears over the years made Lampert the largest creditor, chairman, principal shareholder and, until the bankruptcy filing date, CEO. Unlike the money owed to the members of the creditors' committee, almost all the loans that ESL had given to Sears were covered by hard assets such as real estate.

In response to the filing, Lampert's hedge fund said that "all transactions were in good faith on fair terms and beneficial to all parties to Sears," to make the company profitable again.

The fund said that it has fully cooperated with the audit of transactions between Sears and the creditors. ESL also said it was "confident that the processes we pursue are incontestable".

"We reject any allegation to the contrary and will vigorously dispute any attempt to assert claims against ESL, its principals or its affiliates in relation to these transactions," said the hedge fund.

Lampert has repeatedly stated that his offer is in the best interests of employees, creditors and other stakeholders, as well as the communities served by Sears.

However, the creditors mocked the offer as "nothing more than the final fulfillment of a year-long program to rob Sears and his creditors of assets and their employees while they lined up Lampert's and ESL's own pockets."

If Judge Drain agrees with the creditors and blocks Lampert's offer, Sears and Kmart would close and their assets would be liquidated. The auction did not include any other bidder who wanted to keep the company open.

So far, however, Drain has been open to suggestions that would help Sears stay alive. During a Friday hearing, Drain said "it would be a very good thing" if there was a way to save the jobs of some 45,000 remaining Sears employees by keeping the business in business. Drain added, however, that he would still consider creditors' claims.

Even if Lampert and ESL are successful, there is no guarantee that Sears will stay healthy. It is common for a retailer that emerges from bankruptcy to file for bankruptcy again.

The children's clothing retailer Gymboree, for example, filed for bankruptcy on Wednesday for the second time and said it would close its flagship brand. RadioShack and American Apparel had similar fates.
,

No comments:

Post a Comment