Specialty Retail Shops Holding Corp – Court Approves $2.2mn Sale of Visa/Mastercard Class Action Claim to Halcyon Loan Trading Fund

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May 9, 2019 – The Court hearing the Specialty Retail Shops Holding Corp (Shopko) case issued an order approving the sale of the Debtors' Visa/Mastercard class action claim to Halcyon Loan Trading Fund LLC (the “Purchaser”) for $2.2mn [Docket No. 1276]. The Visa/Mastercard class action plaintiffs allege that Visa, MasterCard, and major credit card issuers engaged in a conspiracy to fix interchange fees, also known as swipe fees, that are charged to merchants for the privilege of accepting payment cards, at artificially high levels. In furtherance of the sale of this asset, the Debtors obtained data for the period of January 1, 2004 to December 31, 2018 showing credit card interchange fees of approximately $166 million.

As previously cited from the Debtors' motion [Docket No. 1052], “Throughout the case, the Debtors have been exploring strategic alternatives to maximize value for the Debtors’ remaining assets, including the sale of their non-operational assets, such as the Visa/MasterCard Claim. On September 12, 2013, the United States District Court of the Eastern District of New York held a final approval hearing concerning the Visa/MasterCard Case, the related Visa/MasterCard Claim settlement agreement, and entered an order (the ‘Proposed Class Settlement Order’) on January 14, 2014. The Proposed Class Settlement Order was rejected by the United States Court of Appeals for the Second Circuit for conflict of interest issues; however the settlement was approved (the ‘Class Settlement Order’) on January 28, 2019. Pursuant to the court-authorized settlement website, ‘[t]he Court has preliminarily approved a proposed settlement of a maximum of approximately $6.24 billion and a minimum of at least $5.54 billion in a class action lawsuit.'

The Debtors’ have received inquiries from various parties interested in purchasing the Visa/MasterCard Claim. Based on these inquiries, the Debtors obtained interchange data from Bank of America Merchant Services for the period from January 1, 2004 to December 31, 2018 showing credit card interchange fees of approximately $166 million. The Debtors and their advisors shared this information with multiple potential buyers and asked the potential buyers to submit offers for the purchase of the Visa/MasterCard Claim. The Debtors did not have, and did not provide, information on the credit card interchange fees for the period of January 1, 2019 through the January 25, 2019; any debit card interchange fees; or any post transaction adjustments, such as refunds, chargebacks, and network fees. After evaluation of all initial bids received, the Debtors selected the highest or otherwise best bid for the Visa/MasterCard Claim at the time. As additional inquiries from various parties interested in purchasing the Visa/MasterCard Claim were received, the Debtors broadened the number of parties to which interchange data from Bank of America Merchant Services was provided. In total, over 37 parties received the interchange data and were given an opportunity to bid on the Visa/MasterCard Claim.”

Key terms of the Claim Agreement:

  • Parties: Sellers: Specialty Retail Shops Holding Corp. and certain of its subsidiaries Purchaser: Halcyon Loan Trading Fund LLC
  • Purchase Price: On the terms and subject to the conditions and other provisions set forth in the Claim Agreement, Purchaser agrees to purchase all right, title and interest in the Claim from Seller, and Seller agrees to sell, transfer and assign all right, title and interest in the Claim to Purchaser for the sum of $2,216,000 (the “Purchase Price”), which is subject to higher or otherwise better offers that may be obtained by the Seller prior to the Bankruptcy Court’s entry of the Sale Order.
  • Closing: The Seller and Purchaser will use reasonable efforts to close no later than May 14, 2019.

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