- Angela Gonzalez-Rodriguez |
New York - This Thursday, Robert Drain, the bankruptcy judge charged with deciding the future of the US department store operator, has approved the rescue plan of the president and Sears' top investor, Edward Lampert.
One of the most controversial moments of the trial came when Judge Drain rejected the arguments of a group of uninsured creditors, who claimed to have discovered facts that show that the fall of Sears was "precipitated by years of misconduct by Lampert, ESL and others against Sears and its creditors." However, the judge said such accusations should not stand in the way of the sale of Sears and would be studied in future trials.
For its part, Lampert has always maintained that his fund has been a constant source of financing for Sears, keeping the retailer alive and that all its transactions were correct.
Bankruptcy judge bids on Sears’ future: safeguarding jobs was key
After hearing all the parties in a three-day trial conducted in a federal court in White Plains, New York, Judge Drain decided to give the green light to the plan presented by Lampert.
The favorite of Hispanic consumers in the United States filed for bankruptcy last October. In January, the president of Sears reached an agreement with insolvency administrators and lenders from the group to repurchase the company through its investment fund, ESL Investments. The price offered was close to 5.2 billion dollars.
As recalled by ‘Fortune’, a competing bid by Abacus Advisory Group LLC, made on behalf of most Sears creditors and landlords, had intended to shut down and liquidate the company.
The judge's decision will prevent not only the entrance of the retail group in bankruptcy proceedings but the closing of more than 400 stores (of the 700 that were originally planned to close) and the loss of some 45,000 jobs.
"I would advise them to get smaller," Greg Portell, partner, and retail adviser at consultancy A.T. Kearney, said as reported ‘USA Today’. In his view, the company probably has about 200 stores that can be successful. "Get smaller and create a foundation from which you can grow, as opposed to a foundation which erodes," suggested Portell.
It should be remembered that the department store chain has accumulated about 12 billion million dollars in losses since 2010, the last year in which it reported profits. Lampert announced in advance his decision to assume the payment of 166 million dollars in accounts pending payment, although days before the court hearing, his lawyer said that, for the time being, no agreement had been reached on that matter.
Once Judge Drain's verdict was known, Lampert's spokesman did not comment directly related to the dispute beyond saying that the hedge fund remains committed to working with Sears to resolve any issue related to the proposal.
After hearing the decision, the Sears group's stock shot up on the New York Stock Exchange, gaining more than 32 percent.