Whether it's this week or 6 months from now, Eddie's gonna lose. He lacks the competence to make any progress - he's had over a decade and he's exactly why sears is in this mess, and now he's going to turn it around? What an absolute joke. They're out of money and out of time.
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Regarding docket 2312. Docket 2312 is about a plan “Sears Oldco” exiting Chapter 11 whole. This is actually the public company that has current shareholders. I do not believe in their plan for many reasons; but it is their stated goal.
I’d been trying to figure what bothered me most about Eddie’s bid. I’ve come to realize is that a large portion of his bid is in taking liabilities from “Sears Oldco” to “Sears Newco”; a phrase ESL now uses in place of “Transform Holdco”. Only $1 billion of his $5.2 billion bid is cash; and it’s not even his or ESL’s cash. That is a loan from a bank; I believe B of A. So that is one entry that goes on his side (balance sheet) for “Sears NewCo” / “Transform Holdco” as a long term debt. Approx $2 billion (1.7B to be accurate) of his bid is a “Credit Bid”. [Debt forgiveness]. Which leaves $2.2 billion of liabilities in his bid that IS NOT cash! Instead his bid accepts to take these liabilities from the balance sheet and simply transfer them to the balance sheet of “Sears NewCo”; presumably as “Accounts Payable”.
That is not just unusual. I’ve never heard of such a sale in a Chapter 11; but it might not be unprecedented. Essentially whatever creditors are on the other side of these $2.2 billion in liabilities will not be receiving cash for what they are owed by “Sears Oldco”; but instead be added to the accounts payable of Sears NewCo (?); if I have this right….????
In a chapter 11 case a buyer typically buys assets free and clear of all prior debt and liens. ESL states this to be the case in hos own bid; while also making it clear part of his bid is composed of taking some liabilities from Sears OldCo and putting them onto his balance sheet? That would be as if Amazon or Macy’s made a multi million dollar bid to buy Sears on the condition that 2/3rds of their bid simply transferred debt to their balance sheet!? In rare cases; usually outside a bankruptcy (SolarCity) a buyer agrees to take ALL the debt from the entity purchased to their balance sheet. BUT I have only seen this as an “ALL” or “NOTHING” purchase; never in the manner proposed by ESL.
Sorry; side tracked a bit from docket 2312.
I am not sure if this plan is based on Eddie’s bid being confirmed; or on it not being confirmed. Essentially Sears Oldco plans to operate their business as a “Going Concern” for an extended period of time under Chapter 11 with a $2.2 billion DIP; until healthy enough to exit Chapter 11. First; companies do not operate in bankruptcy as “Going Concerns”; as that is what bankruptcy is about: NOT being a Going concern to shield them from creditors! Second a DIP is only arranged in bankruptcy and requires agreements with lenders that occur ONLY on the basis of having sufficient unencumbered assets. Third: Sears Oldco claims at this time to have $8 billion in debt. If ESL’s bid is accepted they would still have at least $5 billion in debt; and practically no assets. If ESL’s bid is not accepted they still have $8 billion in debt; but not enough assets to liquidate and cover their debts and exit Chapter 11. … Just my opinion.
Get ready to rumble!!
The judge seems to be siding with Eddie and eventually side with his fraternity brother at the end. He has shown time and time that he has giving Eddie so many breaks and extensions that he wants to keep sears open and overlook all the shady things Eddie has done with Sears. Most likely Eddie must have promised him a new house in his private island in Florida.
Eddie loses.
There will be lots of yelling and gnashing of teeth. At the end, the Judge will sign off on the sale and tell the objectors that BK court isn’t the proper venue to bring what amount to wide-ranging accusations of securities fraud and they need to go to the SDNY if they want to do so.