Nine West Holdings Inc.’s independent directors find themselves in a quandary, caught between creditors of a bankrupt retailer and the private-equity owners accused of sinking its business, WSJ Pro Bankruptcy reported. Alan Miller and Harvey Tepner, who joined Nine West’s board of directors around the time it began exploring a potential bankruptcy, have emerged as focal points in a chapter 11 standoff involving Sycamore Partners, a private-equity firm known for generating returns in retail where other investors have failed. Nine West has a proposed deal with its owner Sycamore Partners and another private-equity sponsor that requires them to kick in $105 million to pay back creditors and lift the retailer out of chapter 11. Some unsecured bondholders see that as a pittance compared to how much money they say Sycamore made off Nine West during and after a 2014 leveraged buyout.
While its future is now in doubt as it goes through bankruptcy, it did not help that Sears spent $6 billion buying back its own shares since 2005 in a futile effort to help support its stock price, according to a CNN Business commentary. The stock plunged more than 99 percent in value, from a high of $143.91 in 2007 to less than $1 a share a couple of weeks before its bankruptcy filing. "If they had put $6 billion into upgrading stores and website development, they could be in a very different position right now," said William Lazonick, a retired University of Massachusetts economics professor and an expert in share repurchases. "They could be in a much better position to compete in the changing world of retail." Sears could have used the money to reduce its debt burden and provide the working capital needed to keep the company out of bankruptcy, according to the commentary. The company had more than $5 billion debt on the books at the time of the bankruptcy filing. Ahead of the filing, Sears chairman and primary shareholder Eddie Lampert had proposed a plan to sell assets and renegotiate debt down to $1.2 billion, which he argued was all Sears could afford.
Nine West Holdings Inc. could face an uphill battle gaining court approval of a settlement of potential lawsuits against private-equity owner Sycamore Partners LP for $105 million in cash, lawyers for junior creditors said at a court hearing yesterday, WSJ Pro Bankruptcy reported. Rolled out shortly after creditors unveiled a proposed $1 billion lawsuit against Sycamore, the Nine West settlement “is a one-handed handshake,” White & Case lawyer Christopher Shore told Judge Shelley Chapman at a hearing in the U.S. Bankruptcy Court in New York. David Golden, lawyer for the official committee of unsecured creditors, called the $105 million offer “measly,” when contrasted to the strength of the claims against private equity owners. The dispute erupted as the shoe and accessory seller rushes to get out of bankruptcy with a chapter 11 plan that hands ownership to investors in the company’s unsecured term loans. Judge Chapman commented that the proposed Sycamore settlement could be “DOA,” or dead on arrival, in light of the protests from creditors that don’t support it. She sent Nine West and its creditors to mediation, in hopes of avoiding a major court clash that the company can’t afford.
Whirlpool has demanded that Sears send back products the appliance-maker shipped in the weeks before the retailer filed for bankruptcy protection, the Chicago Tribune reported. Benton Harbor, Mich.-based Whirlpool, which stopped selling its branded products at Sears last year but makes appliances under Sears’ Kenmore brand, asked the department store chain to return all merchandise it received in the 45 days before its chapter 11 bankruptcy filing on Oct. 15. In a letter filed in court last week, Whirlpool’s attorney demanded that Sears “refrain from selling, disposing, or using … for any purpose whatsoever” the merchandise it received from the appliance-maker during that time without permission from the U.S. Bankruptcy Court. Sears listed Whirlpool as one of its largest unsecured creditors in its bankruptcy filing, saying it owed the appliance maker $23.4 million. But Whirlpool isn’t the only company asking the retailer to send goods back. Twentieth Century Fox told Sears it wanted $207,260.15 worth of merchandise returned, saying it believed Kmart received the products while insolvent, according to a letter filed with the court. The merchandise should not be sold without Fox’s written consent or a court order, an attorney for Fox wrote. Invicta Watch Co., Body Flex Sports, Reynolds Consumer Products and East Penn Manufacturing sent similar letters. Read more.
One of the worst outcomes for a business owner is having a major customer file for bankruptcy and leave behind a large unpaid account receivable. ABI's Business Creditor’s Guide to Distressed Vendors, Debt Collection and Bankruptcyprovides an insider’s look into the options available to help screen a business’s customers, plan for worst-case scenarios, and, if the situation does arrive, efficiently handle the fallout.
The Sears store in White Plains, N.Y., is open for business, while at a bankruptcy court a 10-minute walk away, an army of lawyers, bankers and financial advisers is gearing up to determine the outlet’s fate and the future of hundreds of stores like it, according to a Wall Street Journal commentary. Sears, which is based in Chicago and has a long history there, sought court protection in New York’s suburban Westchester County. The retailer’s decision to take a stand far from its headquarters was no surprise to bankruptcy professionals. By filing in White Plains, Sears chose not only its court but also its judge: Robert D. Drain. For retailers hoping to survive chapter 11, there’s a big difference between Chicago and New York. Judges in the Seventh Circuit, where Chicago’s bankruptcy court is located, spurn a concept called “critical vendor,” which allows troubled companies to pay off old bills from important suppliers during a bankruptcy instead of making them wait until the end of the case. On Oct. 15, day one of Sears’s bankruptcy case, Judge Drain gave Sears something it likely couldn’t have gotten if it had filed for bankruptcy protection in Chicago: permission to pay $70 million to important suppliers of top brands, according to the commentary.
Prospective lenders to Sears Holdings Corp. have so far rejected Chairman Eddie Lampert’s appeals to help fund a loan and stave off liquidation. Now the company is trying new tactics to attract financing, Bloomberg News reported. A Sears lawyer told a judge on Thursday that the department-store chain was reviewing alternative structures for a proposed $300 million bankruptcy loan intended to keep stores open during the holidays. Lampert’s ESL Investments Inc. has been in talks to provide at least some of the money along with hedge fund Cyrus Capital Partners. But after approaching several other potential lenders asking them to help fund the loan, ESL has found no takers. The cold shoulders could test Lampert’s resolve to once again prop up the department-store chain, which already owes him and his investment entities more than $2.6 billion. The hedge fund manager, who is also Sears’s biggest shareholder, has said he wants to buy some of the company’s stores out of bankruptcy and keep the retailer going as a slimmer, less-indebted business.
Major toymakers are still reeling from the loss of Toys “R” Us, even as retailers from Best Buy Co. to Party City Holdco Inc. expand their kids offerings ahead of the holiday, Bloomberg News reported. Mattel Inc. and Hasbro Inc. both warned investors in earnings calls this week that there are still more quarters of pain ahead after losing one of its major customers, which filed for bankruptcy last September and liquidated earlier this year. Their stock prices fell. Hasbro Chief Executive Officer Brian Goldner spent much of his company’s conference call Monday trying to convince investors that the disruption from Toys “R” Us would be short term, lasting just a few more quarters. Read more.
One of the worst outcomes for a business owner is having a major customer file for bankruptcy and leave behind a large unpaid account receivable. ABI's Business Creditor’s Guide to Distressed Vendors, Debt Collection and Bankruptcy provides an insider’s look into the options available to help screen a business’s customers, plan for worst-case scenarios, and, if the situation does arrive, efficiently handle the fallout.
Sears Holdings Corp. has the gift of additional time as it looks to nail down further bankruptcy financing, WSJ Pro Bankruptcy reported. The retailer sought chapter 11 protection last week with former Chief Executive Edward Lampert’s hedge fund, ESL Investments, slated to provide a so-called junior financing package of $300 million. Since then, the company’s advisers have been contacting other potential lenders to provide a portion of the financing alongside Lampert, said Ray Schrock, a company attorney, in bankruptcy court on Thursday. The advisers haven’t only been in discussions with various lenders but are considering different financing structures, he added. Working in their favor, the clock has slowed a bit on when Sears must nail down the loan. “The company has stabilized to a large degree, and operations did much better than forecasted under the [debtor-in-possession financing] budget last week,” Schrock said yesterday. Read more.
In related news, Two Sears Holdings Corp. board directors have hired investment bank Evercore Inc. to scrutinize deals that were led by former Sears Chief Executive Eddie Lampert with the U.S. retailer before it filed for bankruptcy protection, Reuters reported. The deals, including separations of Sears’ businesses and real estate, may come under examination in bankruptcy proceedings, with creditors claiming the transactions stripped the retailer of valuable assets. Billionaire Lampert is the largest shareholder and creditor of Sears through his hedge fund, ESL Investments Inc. Sears directors Alan Carr and Bill Transier, who joined the retailer’s board earlier in October, would work with Evercore to examine the deals and decide whether there are grounds for any legal action against Lampert, according to bankruptcy-court papers filed last week. Read more.
