Sears Holdings – Unsecured Creditors Objects to DIP Financing, Debtors’ “Unlawful Roll Up” of Prepetition Debt

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November 26, 2018 – The Debtors’ Committee of Unsecured Creditors (the “Committee”) objected to the Debtors’ DIP financing motion [Docket No. 872]. The objection [Docket No. 884] states, “[The Committee objects to] (i) the Debtors’ request to impose on their estates and their unsecured creditors a 5:1 Roll Up of prepetition secured debt to maximum incremental financing under the DIP ABL Facility at Debtors that are not obligated on the Prepetition ABL Obligations (the ‘Non-Obligor Debtors’) and (ii) the granting of adequate protection claims and liens to the Prepetition Credit Parties (including the Second Lien Lenders) at Non-Obligor Debtors and on previously unencumbered assets (the ‘Previously Unencumbered Assets’), which is contemplated by both the Final DIP Order and Junior DIP Order….The Debtors’ only justifications for providing the unlawful Roll Up and extensions of adequate protection are that the DIP ABL Facility and Junior DIP Facility are the best financing options available and have no material impact on unsecured creditors….However, approval of lender protections that violate the Bankruptcy Code and applicable law cannot be sanctioned under the guise that such terms are the best available.”

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