A customer enters a Sears department store in Riverside, Illinois, USA, 28 December 2018. The 125 year old institution employees 68,000 people has been in bankruptcy since October 2018. According to reports Sears and Kmart face liquidation unless a 4.8 billion USD proposed by ESL Investments is submitted and accepted.Sears and Kmart face liquidation, Riverside, USA - 28 Dec 2018

All eyes are on Sears.

The insolvent retailer will head to bankruptcy court on Monday.  Eddie Lampert, former chief executive officer and current chairman of Sears Holdings, and his hedge fund ESL Investments won the bid to reclaim the company on Jan. 17. In a few days, a bankruptcy judge will determine the company’s future.

But a slew of motions have been filed by creditors since then, asking the courts to reject the deal. 

On Friday, ESL filed an official response, saying its $5.2 billion bid to acquire what’s left of Sears — including more than 400 stores operating under the Sears and Kmart nameplates, its real estate and roughly 45,000 employees — meets every applicable standard under the bankruptcy code and should be approved. Sears filed for bankruptcy on Oct. 15

“The [Unsecured Creditor Committee’s] bombastic opposition, distinguished by its theatrical attempts to argue inapplicable law and irrelevant facts, is nothing more than further confirmation of their liquidate and litigate strategy, which they have pursued single-mindedly since the UCC’s formation,” the filing stated.   

“When viewed through the appropriate lens, there is no question that the ESL bid meets and exceeds the standards for approval,” the filing reads.

ESL also pointed out that it’s “critically important” to remember what is and is not the issue at stake.

“The sale hearing is about whether the ESL bid is the highest or best bid received by the debtors and will provide the debtors with more value than any other alternative, including liquidation,” the filing states. “The sale hearing is not about whether the debtors will or will not be administratively solvent after closing — even though that is highly likely.”

Sears store Streets of Southglenn, r m. Signs mark the closing of a Sears store in the Streets of Southglenn mall in Littleton, ColoSears - 31 Dec 2018

A Sears store in Littleton, Colo., last December.  David Zalubowski/AP/REX/Shutterstock

Even so, many believe liquidating and selling off Sears’ parts is the fastest route to reclaiming their money. Others say the sale to Lampert will likely result in Sears returning to bankruptcy court in the near future.

“The business plan upon which the ESL Sale is premised (the ‘ESL Business Plan’) assumes — without adequate (if any) support — that the same insiders that drove Sears into bankruptcy can ‘transform’ the enterprise through unprecedented and unsubstantiated growth rates and with razor thin liquidity,” reads a Jan. 28 filing by the Unsecured Creditors Committee.

The same filing went on to call ESL’s business plan “unrealistic,” and said the auction process was “confusing and inadequate from the start.”

“Lampert and ESL have acted with methodical precision for more than a decade to enrich themselves at Sears’ expense, secure control over Sears’ best assets and attempt to shield such assets from the reach of other creditors,” the filing states. 

Pension Benefit Guaranty Corp., Sears’ largest creditor, filed a separate objection to the sale last month. The firm is worried that Lampert’s deal could wipe out pensions for about 90,000 employees. 

Still, ESL is steadfast in that it acted in “good faith” throughout the auction process, and that Sears, “appropriately resized and with a lighter debt load, can and will succeed.”

The hearing is scheduled for Monday in New York.

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