Sears’ creditors registered their most forceful objection yet to Eddie Lampert’s $5.2 billion bid to buy the bankrupt retailer, describing it as a “fantasy” in a 360-page court filing on Monday.
The group of landlords, suppliers and lenders argue that a sale of Sears to its chairman would render the Sears estate insolvent and unable to pay its creditors. They say Sears should liquidate instead.
The estate is dinged more than $6 million each day the storied retailer remains open for business, according to the filing, which was heavily redacted.
If the sale receives the court’s blessing early next month — the first sales hearing begins on Feb. 4 — the creditors maintain that it will be “a matter of months” before Sears is in financial distress again.
Lampert’s Sears operating 400 stores and retaining 45,000 employees, along with Sears’ Kenmore and Diehard brands and its home improvement division.
The plan “assumes that the same insiders that drove Sears into bankruptcy can ‘transform’ the enterprise through unprecedented and unsubstantiated growth rates” the creditors wrote in the filing.
The hedge fund mogul’s ESL Investments was the winning bidder at a Jan. 14 auction, which the creditors describe as a “one-horse race to transfer Sears and its valuable assets to ESL,” according to the filing.
The creditors say that the auction process was “confusing,” “inadequate” and never included an opportunity to bid on Sears’ individual assets.
What’s more, ESL undervalued Sears’ assets, according to an analysis by the creditors, who have been investigating past transactions by ESL, including the sale of real estate and Land’s End.
Lampert’s real objective, according to the creditors, is to liquidate the company himself.
They combed through 130,000 documents and interviewed numerous executives from ESL and Sears, concluding that there is “substantial evidence that Lampert and ESL have acted with methodical precision for more than a decade to enrich themselves at Sears’s expense.”
Pension Benefit Guaranty Corp. is Sears’ largest creditor and filed a separate objection to the sale over the weekend. There will be other objections filed in the coming days, according to David Pollack, an attorney representing a number of landlords.
ESL declined to comment.