Dozens of Sears vendors are calling for a bankruptcy judge to convert the retailer’s Chapter 11 into a liquidation — a last-ditch bid to keep its dwindling assets out of the hands of high-paid lawyers and bankers in the case.
Sears Holdings — the former parent of Sears and Kmart, which has unloaded the company’s remaining stores to billionaire Eddie Lampert — is looking for a judge to approve a reorganization plan this week that would settle debts and distribute the 125-year-old company’s assets.
A group of vendors, however, are demanding that US Bankruptcy Judge Robert Drain convert the case to a Chapter 7 liquidation and appoint an independent trustee to mediate their gripes.
These vendors, who have not been paid in more than a year for the goods they shipped to Sears, are demanding that Sears’ lawyers not “bill one more hour to this estate,” according to a court filing on Monday.
The filing is among dozens representing up to 70 vendors who have asked the court not to allow Sears to exit bankruptcy at a hearing scheduled for Oct. 3.
The vendors accuse Sears’ professional advisers — including law firms Weil, Gotshal & Manges, Paul Weiss, and Akin Gump Strauss and the investment banks Lazard Freres and Houlihan Lokey Capital — of only being interested in paying themselves.
“The time has come for the professionals for the debtors and creditors’ committee to stop wasting the precious, little cash on hand which rightfully belongs to administrative creditors,” according to the filing.
These firms “burn through about $2 million a week,” said Joseph Sarachek, who represents 13 vendors in the case.
At issue, according to the filing on behalf of overseas apparel and accessories manufacturers who are on the brink of insolvency themselves, is Sears request to exit bankruptcy without paying the vendors who should “be assured that sometime in the future their claims will be satisfied in full.”
The vendors claim that lawyers, bankers and other consultants have squirreled away some $30 million out of the estate to pay their bills. As of Sept. 21, the estate had just $50.1 million in cash, according to court documents.
“The professionals favored themselves over other creditors and now these same professionals want to be paid in full while leaving other administrative creditors holding the bag,” according to the filing.
Weil Gotshal did not immediately respond to a request for comment.