A U.S. bankruptcy court judge will decide the fate of struggling retailer Sears and its unsecured creditors, according to a report by CNBC.
The people owed money, unprotected by collateral, are getting a court date to tell the judge about issues that they have with hedge fund magnate Eddie Lampert, who led the store to combine with Kmart in ‘05 and acted as its chairman, largest investor and CEO.
While he led the company, it closed more than 3,500 stores, cut about 250,000 jobs and saw share prices fall from $193 per share to less than $1.
The creditors are against Lampert’s $5.2 billion deal to get Sears out of bankruptcy through his hedge fund, ESL Investments. The deal is the only one that would save the failing company. The creditors have a number of grievances, including that Lampert stole assets and, because of his sole position as head of Sears, performed years of misconduct.
ESL is the most protected of all Sears’ creditors. Judge Robert Drain will have two hearings, one on Monday (Feb. 4) and another on Wednesday (Feb. 6). The judge has previously granted Lampert and Sears more time to come to an agreement, showing a desire for a deal that would save jobs.
One of Sears’ unsecured creditors is the Pension Benefit Guaranty Corp. (PBGC), an organization that guarantees Sears’ pension and is $1 billion underfunded. The group is upset because it says a new deal will undo a previous deal from 2015. To help bridge the gap in funding, Lampert gave the organization a lien and some royalty fees from Sears’ brands Kenmore, Diehard and Craftsman.
The contention from the PBGC is that the new deal will give Lampert back full authority over Kenmore and Diehard and leave more than 90,000 pensioners out in the cold.
The retailer has not turned a profit since 2010 and posted a loss of $193 million in December.