Sears Holding Corp.

December 13, 2018  Communication:  https://conta.cc/2RZRkcL

 

December 8, 2018 Communication:

 

Many of you have been asking me about the latest offer of ESL/Cyrus and Sears' long term viability. See ESL SEC Filing

 

ESL is proposing to buy Sears, its real estate and Kenmore in a deal that does not provide alot of new cash but would forgive Sears’s existing debts and roll over the company’s other debts.

 

ESL values the deal at $4.6 billion, largely from $950 million in new loans, as well as the forgiveness of $1.8 billion in debt and $1.1 billion of assumed liabilities. 

 

Will this deal go through in its current form and what does it mean for creditors? It depends on whether breaking up the Company, selling the Kenmore brand, the auto business, and the real estate presents a better alternative. Recall that Sears has over $9 billion in total debt so $4.6 billion does not cover the debt in full. Current pricing of unsecured claims is 4-5% which indicates investors have little faith in a recovery. On the other hand, if there are no other bidders who are willing to pay more and liquidation doesn't provide significant consideration, vendors and Sears' 50,000 employees are certainly better off with the deal.

 

Perhaps most troubling is the fact that the latest numbers posted by Sears appears to indicate that their business is losing money on a run rate basis. If this is true, even if the deal goes through it may only be a matter of time before ESL/Cyrus seeks to liquidate the business and is left with the real estate.

 

So what can be done? We are pressing Sears to pay their pre-petition vendors who have 503(b)(9) claims, or at the very least, to establish a process to validate these claims so the claims can be financed. Current pricing on 503(b)(9) claims is in the 60's. We believe that there is a reasonable prospect of 503(b)(9) creditors being paid in full, however, it will take time, maybe nine months or longer. Many vendors cannot wait this long. That is why you need an someone advocating on your behalf. We are working on getting financing in place for our clients on 503(b)(9) claims. Should you desire individual representation , please feel free to contact me at joe@saracheklawfirm.com.

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