Sears Holdings Corporation – Files Amended Chapter 11 Plan and Disclosure Statement, Liquidation Analysis Notes $334.0m of Distributable Proceeds

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May 16, 2019 – The Debtors filed an amended Plan and a related Disclosure Statement [Docket Nos. 3894 and 3895]; and separately filed redlines of each document showing changes from versions filed on April 17, 2019 [Docket No. 3896]. The new documents include greater detail on classes and projected recoveries (see below) and the Disclosure Statement attached a liquidation analysis which note $334.0mn of total distributable proceeds.

The Disclosure Statement notes, “The Debtors commenced these Chapter 11 Cases with the goal of selling substantially all of their assets (the ‘Global Assets’) as a going concern. As of the Commencement Date, approximately 400 of the Debtors’ stores were four-wall EBITDA positive, and the Debtors understood that a successful sale of these viable stores as a going concern could save the businesses and the jobs of tens of thousands of employees that depend on the continued operation of the Debtors’ stores. However, the Debtors determined early on that: (i) the Debtors must continue to explore all available alternatives to seek the most value maximizing option; and (ii) to help finance the Chapter 11 Cases, maximize value, and, importantly, fund their hard-fought Wind Down Account, the Debtors would need to market and sell certain of their non-core and unencumbered assets, such as the specialty businesses. Importantly, at all times, the Debtors were aware that time was of the essence and they communicated that to all concerned, including communicating an aggressive timeline to conduct the Sale Process. The Chapter 11 Cases had to progress with all deliberate speed to minimize the substantial operating losses that continued to decrease the value of the Debtors’ estates.

The Plan contemplates a Wind Down of the remaining assets of the Debtors’ estates—primarily litigation claims—and a distribution to creditors in accordance with the absolute priority rule and certain settlements, as described herein. Specifically, the Plan provides for the approval of the settlement with the Pension Benefit Guaranty Corporation, as modified (the ‘PBGC’ and, such settlement, the ‘PBGC Settlement’).

On the Effective Date of the Plan, all of the Debtors’ assets will be transferred to the Liquidating Trust and the Debtor legal entities will be dissolved. A Liquidating Trustee and board of directors will be appointed to carry out the terms of the Plan. The Plan constitutes a single chapter 11 plan for all of the Debtors and the classifications and treatment of Claims and Interests therein apply to each of the Debtors collectively. The Plan does not propose to substantively consolidate the Debtors, but does incorporate a settlement of disputes relating to whether the Debtors should be substantively consolidated.

The following is an updated summary of classes and voting rights (defined terms are as defined in the Plan and/or Disclosure Statement). 

  • Class 1 (“Priority Non-Tax Claims”) is unimpaired, presumed to accept and not entitled to vote on the Plan. The estimated aggregate amount of claims is $2.0mn and the estimated recovery is 100%.
  • Class 2 (“Other Secured Claims”) is unimpaired, presumed to accept and not entitled to vote on the Plan. The estimated aggregate amount of claim is N/A and the estimated recovery is N/A.
  • Class 3 (“PBGC Claims”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claim is $800.0mn and the estimated recovery is 14.7% ($118.0mn).
  • Class 4 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claim is $3,940.0mn and the estimated recovery is 2.5% ($98.0mn).
  • Class 5 (“ESL Unsecured Claims”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claim is $1,761.0mn and the estimated recovery is 0.8% ($14.0mn).
  • Class 6 (“Intercompany Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated aggregate amount of claim is N/A and the estimated recovery is N/A.
  • Class 7 (“Intercompany Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated aggregate amount of claim is N/A and the estimated recovery is N/A.
  • Class 8 (“Subordinated Securities Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated aggregate amount of claim is N/A and the estimated recovery is 0.0%.
  • Class 9 (“Existing SHC Equity Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated aggregate amount of claim is N/A and the estimated recovery is 0.0%.

The following documents were attached to the Disclosure Statement:

  • Exhibit A: Plan
  • Exhibit B: Corporate Organizational Chart
  • Exhibit C: Liquidation Analysis

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