The nation’s longest and largest retail bankruptcy could finally be coming to an end.
Creditors to split $175M after four-year slog
By Alan Wolf, YSN
A final chapter in the nearly four-year-old Sears bankruptcy saga may be about to close.
According to Retail Dive, a settlement has finally been reached between Sears Holdings, the former parent of the failing retailer, and its one-time CEO and majority shareholder Eddie Lampert. If approved by a federal bankruptcy judge, creditors including vendors, advisers, landlords and investors stand to split a mere $175 million in reparations for what they described as asset stripping and “rank” self-dealing in the lead-up to the chain’s 2018 Chapter 11 filing.
Lampert, a billionaire financier who added Sears to his Kmart holdings in 2005, is accused by plaintiffs of treating the retail chains like a financial feeding trough. During his 13 years at the helm, the former Sears chairman closed stores and sold or spun off major assets including Lands’ End, Craftsman, Sears Canada and Seritage Growth Properties, which held a large chunk of Sears’ real estate. Lampert and his ESL hedge fund invested in and often took controlling interests in the divestitures, which funneled rent, interest and product payments to their coffers while Sears and Kmart were slowly bled dry.
Lampert later reacquired the remaining assets of Sears Holdings in a $5.2 billion bankruptcy sale and parked them in a holding company called Transformco.
Speaking to the New York Post, former Sears Canada CEO Mark Cohen described last week’s $175 million settlement as “a pittance of what I believe Lampert and his associates should be asked to pay” vendors and other creditors. The former includes Whirlpool, Sears’ seventh-largest unsecured creditor, with $23.4 million in unsecured claims at the time of the Chapter 11 filing; Electrolux, the eighth-largest unsecured creditor, with $18.6 million in unsecured claims; Daewoo, Sears’ ninth-largest unsecured creditor, owed $15.2 million; and Samsung, ranked 13th on the unsecured creditor list with $8 million in unsecured claims.
With just a handful of empty Sears and Kmart stores still in operation, it’s hard to recall a time when the two brands ruled the retail roost with more than 6,000 combined locations. Sears, founded in 1893 by Richard Warren Sears and Alvah Curtis Roebuck, was, in a sense, America’s first Amazon, keeping a largely rural nation stocked with a wide assortment of goods through its iconic mail order catalog. The company assumed an even greater cultural and economic role in the post-World War II boom years by providing the TVs, lawn mowers and home appliances that helped define a suburban middle class, while S.S. Kresge’s Kmart created the discount store template that would serve millions of lower-income customers.
But greed, neglect, mismanagement and competition would render the chains irrelevant to a new generation of millennial shoppers, ultimately consigning Sears and its sister Kmart to the pages of retail history.