Court: Sears liquidation plan good to go
Christian Fernsby ▼ | October 8, 2019
Sears Holdings got court approval of a Chapter 11 liquidation plan.Article continues below
Topics: SEARS LIQUIDATION
This is requiring suppliers that kept its shelves stocked in bankruptcy to wait for their money or take a discounted payoff.
Judge Robert Drain of the U.S. Bankruptcy Court in White Plains, N.Y., said he would sign off on a creditor repayment plan despite the company's admission that it doesn't have the cash to pay essential bills, including tens of millions of dollars owed to companies that supplied goods while Sears tried to stay afloat earlier this year.
The decision marks the "beginning of the end" of Sears's bankruptcy case after nearly a year, said David Wander of Davidoff Hutcher & Citron LLP, a lawyer for a number of Sears vendors and creditors. The ruling is good news for all Sears creditors, which can finally look forward to repayment at some point in the future, Mr. Wander added.
Judge Drain said Monday that the Sears shell company left behind after former Chairman Edward Lampert bought out the best stores is projected to be short by $36.5 million to $104.5 million in covering the payment obligations it needs to meet before exiting bankruptcy. Under the liquidation plan, unsecured creditors will recover 2.5 cents on the dollar.
The plan will become effective once money starts to flow into the bankruptcy estate from potentially preferential payments that went out the door before Sears filed for bankruptcy, Judge Drain said. Sears's bankruptcy estate could rake in about $50 million from those preference claims, Judge Drain said.
Cash is scarce in the bankruptcy case, with about $46 million available for unsecured creditors, according to testimony during the confirmation hearing that began earlier this week. ■ What to read next
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