Sears Holdings – Clover Technologies Group Objects to Store Closing Sales, Cites Lack of Protection for Consignment Vendors

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October 22, 2018 – Clover Technologies Group filed an objection to Sears Holdings’ store closing sales and its assumption of a liquidation consulting agreement [Docket No. 23]. The objection [Docket No. 211] asserts, “In the Motion, the Debtors seek permission to, among other things, liquidate inventory remaining at the Closing Stores, and such other inventory as the Debtors choose, as part of the Store Closing Sales, asserting that doing so will maximize value to all stakeholders. The Motion fails, however, to even mention, let alone address, the rights of consignment vendors like Clover. Since the Consignment Agreement provides that Kmart is obligated to pay Clover within 15 days of the sale of Merchandise to the retail customer, the proposed sale of the Merchandise in the Store Closing Sales has the effect of forcing Clover to sell goods on credit to the Debtor, post-petition, without its consent and without any adequate protection. In the absence of appropriate treatment as a Trust Fund Counterparty as set forth in the Trust Order, or other appropriate and adequate protection of its rights in and to the Merchandise acceptable to Clover, Clover objects to the liquidation sale of its Merchandise at the Store Closing Sales….Whether Clover’s transactions with Kmart constitute a consignment or give rise to a purchase money security interest, Clover holds title to the Merchandise and its interests therein are senior to any liens or claims held by any other party, including but not limited to Bank of America, JPMorgan Chase Bank and Wells Fargo Bank. Nonetheless, according to the Motion, the Debtor intends to use the proceeds from the sale of the Merchandise for liquidity and to pay down the DIP financing.”

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