Creditors of bankrupt Sears Holdings Corp. have run out of money to continue litigating billion-dollar claims against former chairman Eddie Lampert and a host of other defendants who they say stripped the company of valuable brands and real estate assets as the retailer spiraled into insolvency, Reuters reported. The Sears bankruptcy plan called for the estate to set aside $25 million to pursue the claims, but that money is gone, along with another $7.1 million owed to Akin Gump Strauss Hauer & Feld, lead counsel for the liquidating trust. Billions in claims and no money to litigate? That’s what litigation finance is for, according to an April 21 motion by the Sears creditors committee. The motion asks U.S. Bankruptcy Court Judge Robert Drain of White Plains, New York, to approve an agreement between Sears, the creditors’ committee and the litigation funder Bench Walk Advisors LLC for up to $35 million in financing to continue prosecuting two adversarial proceedings, one against Lampert and his alleged allies, the other against 139 former Sears shareholders. The deal would put Bench Walk first in line to collect from any recovery from the cases but limits the litigation funder’s initial entitlement to its principal plus 15% annualized interest. Bench Walk will only receive additional returns on its investment if the recovery is enough to pay off administrative, priority and secured claims against the Sears estate.
