The future of Sears rides on arguments in a packed courtroom Thursday.
On one side are attorneys for the 133-year old retailer, arguing that Sears Chairman Eddie Lampert should be able to buy 425 Sears and Kmart stores. Lampert, who is bidding $5.2 billion for the assets through his hedge fund, also wants to buy some of Sears’ best known brands, such as Kenmore appliances and DieHard batteries. They say a new, smaller Sears can be profitable and competitive.
On the other side are attorneys for a committee of creditors, including landlords and vendors, owed more than $3 billion. They argue Sears stands no chance to survive long term, and it should be shuttered and liquidated.
The decision rests with US Bankruptcy Court Judge Robert Drain, who has been hearing the case since Sears filed for bankruptcy in October. Drain has repeatedly expressed a desire to save the jobs of as many of Sears’ employees as possible.
Drain’s decision hinges on what he thinks is best for creditors. He has heard two days of arguments and testimony already this week and is prepared to hear closing arguments from the two sides Thursday morning. He said he may rule from the bench at the conclusion of the hearing.
Pension insurer blesses sale
At the hearing Thursday morning, Pension Benefit Guaranty Corp., the federal pension watchdog, dropped its objection to Sears’ sale. The agency last week took over two underfunded pension plans covering 90,000 Sears retirees and other beneficiaries. It also took over assets in the plan.
The agency had agreed to reduce the amount of underfunding it would ask Sears to cover from $1.7 billion down to $800 million, according to Ray Schrock, one of Sears’ attorneys.
What’s left to be decided?
The most serious issue left to be decided is how much of the $166 million in accounts payable Lampert and his hedge fund ESL are willing to assume. Schrock said that disagreement still needs to be settled before a sale can close.
“This is an important issue,” Schrock said. “We have not come to terms with ESL. We’re not going to engage in post closing litigation. If ESL is prepared to take on the $166 million, we have a deal. If they’re not, we don’t have a deal.”
Earlier this week ESL issued a statement that it remains committed to working with Sears to resolve any outstanding matters.
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