November 19, 2018 – The Court hearing the Sears Holdings case approved the Debtors’ motion requesting authority to (i) implement procedures for store closing sales and (ii) assume a liquidation consulting agreement with Abacus Advisors Group [Docket No. 823].
As previously reported [Docket Nos. 23 and 337], “The motion attaches a list of the 142 stores to be closed. Closing the Closing Stores will maximize value to all stakeholders. It will immediately lower the Debtors’ costs and increase cash flow from operations. The Debtors will liquidate any inventory remaining at the Closing Stores as part of the Store Closing Sales, which the Debtors believe will maximize return on its inventory as part of their store closing process. As part of closing the Closing Stores, the Debtors may transfer their first-generation inventory and other premium products from the Closing Stores to the Debtors’ remaining stores….Of the Initial Closing Stores, 98 were unprofitable in fiscal year 2017, and 44 produced flat or marginal profits in fiscal year 2017 or are trending downwards in 2018 due to local market and competitive factors. To date, no buyer has expressed an interest in buying the Initial Closing Stores on a going concern basis. The liquidation of assets at the Initial Closing Stores is expected to yield approximately $42 million in net proceeds, which will be used to pay down the DIP ABL Facility and fund these chapter 11 cases….By this Motion, the Debtors seek approval of streamlined procedures to sell the inventory, furniture, fixtures, and equipment (‘FF&E’), and other assets in the Closing Stores (collectively, the ‘Store Closing Assets’), in each case free and clear of liens, claims, or encumbrances (the ‘Store Closing Procedures,’ and the sales, the ‘Store Closing Sales’).”The motion continues, “The Debtors are also seeking authority to assume their liquidation consulting agreement (the ‘Liquidation Consulting Agreement’) with Abacus Advisors Group (the ‘Liquidation Consultant’), a liquidation consulting firm that the Debtors have engaged to advise the Debtors on the most effective way to run a seamless and efficient multi-store closing process, and to maximize the value of assets being sold….On an average, the Liquidation Consultant has achieved gross inventory sales of approximately $1.10 – $1.20 per dollar for the Company’s prepetition liquidation sales, which exceeds the market rate of inventory sales achieved for liquidation consultants generally, and particularly when compared to liquidation sales in bankruptcy….In consideration of the services to be rendered, the Debtors will provide the Liquidation Consultant with a fee equal to between $100,000 and $140,000 per month, depending on the number of active closing in any given month in exchange for Store Closing Sales related to the Inventory (the ‘Inventory Fee’)….Sale Expenses include, among other things, the actual cost for each supervisor’s fees of $2,450 per week, plus reasonable travel costs and bonuses (which bonuses are in the discretion of the Liquidation Consultant and based upon a formula, up to a cap of $1,225 per week per supervisor).”
Read more Bankruptcy News