Sears Holdings – Diehard Creditors Committee Objects to Four Month Exclusivity Extension, Wants Access to Claims Against ESL Without Delay

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February 11, 2019 – The Debtors’ Official Committee of Unsecured Creditors (the “Creditors Committee”) objected [Docket No. 2544] the Debtors’ motion to extend their Plan exclusivity period [Docket No. 2312] by a period of four months. In what may be a sign of things to come, ie a continued fight between the Creditors Committee and the emerged Debtors, the Creditors Committee has objected to the Debtors’ request for a four month extension and suggested a maximum of 30 days instead. In a pointed barb, the Creditors Committee takes the opportunity to remind all that they are not about to walk away and that they are looking to get their hands on claims against ESL, Investments, Inc. (“ESL”) as quickly as possible, noting “Indeed, it is the Creditors’ Committee’s constituency that will be the primary beneficiary of the assets to be transferred to the liquidating trust under such a plan, which assets will consist primarily of significant claims and causes of action against ESL, ESL affiliates (including Lands’ End and Seritage) and avoidance actions.”
 
The objection states, “Given the expected imminent closing of the sale of substantially all of the Debtors’ assets to ESL (the ‘ESL Sale’) and the estates’ risk of administrative insolvency, these cases must proceed promptly toward consummation of a consensual liquidating chapter 11 plan. The Debtors’ request for a four month extension of the Exclusive Periods does not progress that objective. The Debtors frame their request for an extension of the Exclusive Periods as standard procedure in these ‘large’ and ‘complex’ cases—a necessary next step in light of their accomplishments to date. Yet, upon the closing of the sale, (i) the Debtors no longer will have any operating businesses for which the Chapter 11 Cases are a disruption, (ii) the only assets of any significance that will remain in the Debtors’ estates will be litigation claims and (iii) the estates will be at risk of being administratively insolvent. In short, the Debtors are winding down and will be liquidating their remaining assets, principally litigation claims, through a trust to be established under a chapter 11 plan. These changed circumstances are not cause for a four month extension of the Exclusive Periods. As a result, the Court should limit any extension of the Debtors’ Exclusive Periods to no more than 30 days in order for the Debtors and the Creditors’ Committee to work together to reach consensus on the terms of a liquidating chapter 11 plan. Indeed, it is the Creditors’ Committee’s constituency that will be the primary beneficiary of the assets to be transferred to the liquidating trust under such a plan, which assets will consist primarily of significant claims and causes of action against ESL, ESL affiliates (including Lands’ End and Seritage) and avoidance actions. Working swiftly with the Debtors to negotiate and document such a liquidating chapter 11 plan is of paramount importance to the Creditors’ Committee’s constituency and is a necessity based on the Debtors’ expected financial position following the anticipated consummation of the ESL Sale.”

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