Sears Holdings Corporation – Files Plan and Disclosure Statement, Aims for July 23 Confirmation

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April 17, 2019 – The Debtors filed a Chapter 11 Plan, a related Disclosure Statement and a motion requesting the Court's approval of the Disclosure Statement [Docket Nos. 3275, 3276 and 3277, respectively].

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 (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 (defined below) 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 separately. The Plan does not propose to substantially consolidate the Debtors.”

The following is a summary of classes and voting rights (defined terms are as defined in the Plan and/or Disclosure Statement). Please note that projected recoveries have not yet been provided and a "Recovery Analysis" is listed as an exhibit "to be filed":

  • Class 1 (“Priority Non-Tax Claims”) is unimpaired, presumed to accept and not entitled to vote on the Plan.
  • Class 2 (“Other Secured Claims”) is unimpaired, presumed to accept and not entitled to vote on the Plan.
  • Class 3 (“PBGC Claims”) is impaired and entitled to vote on the Plan.
  • Class 4 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan.
  • Class 5 (“ESL Unsecured Claims”) is impaired and entitled to vote on the Plan.
  • Class 6 (“Intercompany Claims”) is impaired, deemed to reject and not entitled to vote on the Plan.
  • Class 7 (“Intercompany Interests”) is impaired, deemed to reject and not entitled to vote on the Plan.
  • Class 8 (“Subordinated Securities Claims”) is impaired, deemed to reject and not entitled to vote on the Plan.
  • Class 9 (“Existing SHC Equity Interests”) is impaired, deemed to reject and not entitled to vote on the Plan.

The following documents were attached to the Disclosure Statement:

  • Exhibit A: Plan
  • Exhibit B: Corporate Organizational Chart
  • Exhibit C: Recovery Analysis (to be filed)
  • Exhibit D: Liquidation Analysis (to be filed)

Proposed Key Dates:

  • Disclosure Statement Objection Deadline: May 9, 2019
  • Disclosure Statement Hearing: May 16, 2019
  • Voting Deadline: July 2, 2019
  • Plan Confirmation Objection Deadline: July 8, 2019
  • Plan Confirmation Hearing: July 23, 2019

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