Sears Holdings Corporation – Requests Exclusivity Extension, Citing Spat with Lampert/ESL Over Asset Purchase Agreement, Still Hope to File Plan by April 18

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April 12, 2019 – Sears Holdings Corporation filed a motion to extend the periods (for a second time) during which the Company has an exclusive right to file a Chapter 11 Plan, and solicit acceptances thereof, through and including June 12, 2019 and August 13, 2019, respectively [Docket No. 3183]. Absent the requested relief, the exclusive filing period expired on April 15, 2019.

The extension motion explains, “The Debtors are seeking another modest extension of the Exclusive Periods at this critical juncture of their chapter 11 cases in furtherance of their fiduciary duties and to continue to try to broker a consensual chapter 11 plan among their various stakeholders. Despite receiving only a two-month initial extension of the Exclusive Periods pursuant to the first exclusivity order entered on February 15, 2019 (ECF No. 2626) (the ‘First Exclusivity Order’), the Debtors have made significant progress on a chapter 11 plan. Since the First Exclusivity Order was entered, the Debtors have drafted a proposed chapter 11 plan and accompanying disclosure statement and distributed the plan to their key stakeholders, including the Official Committee of Unsecured Creditors (the ‘Creditors’ Committee’), the Pension Benefit Guaranty Fund (the ‘PBGC’) and Cyrus Capital Partners, L.P (‘Cyrus’). The Debtors have been working cooperatively with these parties and have conducted numerous calls and in person meetings to negotiate the terms of the plan. The Debtors and their advisors have also been working on an analysis of the Debtors’ intercompany and administrative claims, in consultation with their stakeholders, including the Creditors’ Committee, which is crucial to the structure of the plan and related negotiations. The Debtors anticipate filing a chapter 11 plan prior to the omnibus hearing on April 18, 2019.

Unfortunately, just over a month after obtaining approval of the sale transaction (the ‘Sale Transaction’) with Transform Holdco LLC (the ‘Buyer’) for substantially all of the Debtors’ assets, the Debtors have had to divert limited resources to take action to enforce the terms of the asset purchase agreement dated as of January 17, 2019 (as amended, ‘Asset Purchase Agreement’) against the Buyer to ensure that assets belonging to the Debtors’ estates are rightfully turned over to the Debtors. The Debtors have been pressing forward with their chapter 11 plan negotiations while simultaneously pursuing these assets. The outcome of this dispute will impact the analysis underpinning the plan, further bolstering the Debtors’ need for a modest extension of the Exclusive Periods.

If the Exclusive Periods are not extended and control of the administration of the Debtors’ estates is improperly wrested away now, the Debtors’ chapter 11 cases would be unnecessarily disrupted and could cause further administrative expense burn. Such an outcome is contrary to the fundamental objectives of chapter 11 and should not be permitted. Termination of the Exclusive Periods at this critical juncture in these chapter 11 cases would defeat the very purpose of section 1121 of the Bankruptcy Code—to afford the debtor a meaningful opportunity to propose a confirmable chapter 11 plan based on adequate information that maximizes value and that is fair and equitable to all of the Debtors’ economic stakeholders.”

The Court scheduled a hearing for May 16, 2019 to consider the motion, with objections due by April 19, 2019.

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