Item 8.01. Other Events.
As previously disclosed, on October 15, 2018 (the "Petition Date"), Sears
Holdings Corporation (the "Company") and certain of its subsidiaries (together
with the Company, the "Debtors") filed voluntary petitions (the "Chapter 11
Cases") in the United States Bankruptcy Court for the Southern District of New
York (the "Bankruptcy Court") seeking relief under chapter 11 of title 11 of the
United States Code (the "Bankruptcy Code"), on April 17, 2019, the Debtors filed
a proposed Joint Chapter 11 Plan with the Bankruptcy Court, on May 16, 2019, the
Debtors filed an amended proposed Joint Chapter 11 Plan with the Bankruptcy
Court, and on June 28, 2019, the Debtors filed a Second Amended Joint Chapter 11
Plan with the Bankruptcy Court. On September 13, 2019, the Debtors filed a
Modified Second Amended Joint Chapter 11 Plan with the Bankruptcy Court. On
October 1, 2019, the Debtors filed a Revised Modified Second Amended Joint
Chapter 11 Plan (the "Plan") with the Bankruptcy Court. On October 15, 2019, the
Bankruptcy Court entered an order, Docket No. 5370, confirming the Plan.
The Chapter 11 Cases are being jointly administered under the caption "In re
Sears Holdings Corporation, et al., Case No. 18-23538." Documents filed on the
docket of and other information related to the Chapter 11 Cases are available
free of charge online at https://restructuring.primeclerk.com/sears. Documents
and other information available on such website are not part of this Current
Report on Form 8-K (this "Form 8-K") and shall not be deemed incorporated by
reference in this Form 8-K.
As previously disclosed in a Current Report on Form 8-K filed with the
Securities and Exchange Commission (the "SEC") on January 24, 2019, on
January 17, 2019, the Company and certain of its subsidiaries (together, the
"Sellers") entered into an Asset Purchase Agreement (as amended, the "APA") with
Transform Holdco LLC ("Transform"), an affiliate of ESL Investments, Inc.
("ESL"), a significant creditor and shareholder of the Company, pursuant to
which Transform agreed to acquire from the Company substantially all of the
go-forward retail footprint and other assets and component businesses of the
Company as a going concern (the "Going Concern Transaction"). On February 8,
2019, the Bankruptcy Court entered an order authorizing and approving the Going
Concern Transaction pursuant to the Purchase Agreement (the "Sale Order") and
the Going Concern Transaction was completed on February 11, 2019 pursuant to and
in accordance with the APA and approved by the Sale Order (the "Closing").
Since the Closing, there have been numerous APA-related disputes between
Transform and the Company. On January 28, 2020, the Bankruptcy Court entered an
order, Docket No. 6413 (the "Settlement Order"), approving that certain
Settlement Agreement, by and among the Company, Transform and other Debtor
parties thereto, dated January 10, 2020 (the "Settlement Agreement"), which
reflects the settlement of all outstanding APA-related disputes between
Transform and the Debtors. Pursuant to the Settlement Agreement, (i) the Debtors
will retain over $45 million of funds previously received pursuant to various
Bankruptcy Court rulings and interim settlements, and (ii) approximately
$160 million in liabilities assumed under the APA will remain assumed by
Transform, including certain accounts payable and 503(b)(9) obligations that are
cure costs under the APA. Additionally, the Debtors will receive approximately
$18.3 million in additional payments, including approximately $13 million in
cash from Transform and the release of approximately $5.3 million in utility
deposits. Transform and the Debtors also agreed to transfer to the other party
any future tax refunds, rebates or credits that belong to the other party under
the APA and to regularly reconcile and share information with respect to such
disbursements.
The Settlement Agreement incorporates and ratifies all interim settlements
between and among the Company and Transform relating to the various APA-related
disputes and all previous payments made as a result of the Bankruptcy Court's
prior rulings and interim settlements. Additionally, the parties agreed that
there would be no further litigation, including appeals, associated with the
outstanding APA-related disputes and that Transform would not be required to
satisfy any further 503(b)(9) obligations (other than cure costs) or accounts
payable or severance reimbursement obligations under the APA.
The foregoing description of the Settlement Agreement does not purport to be
complete and is subject to, and qualified in its entirety by, the full text of
the Settlement Agreement, which is filed as Exhibit 99.1 to this Form 8-K and
incorporated by reference herein.
Forward-Looking Statements
Various statements in this Form 8-K or documents referred to herein, including
those that express a belief, expectation or intention, as well as those that are
not statements of historical fact, are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of
the Securities Exchange Act of 1934, as amended, and/or the Private Securities
Litigation Reform Act of 1995, as applicable. All statements, other than
statements of historical facts, included in this filing that address activities,
events or developments that the Company expects, believes, targets or
anticipates will or may occur in the future are forward-looking statements. The
Company's actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain risks and other factors, which
include the following: risks and uncertainties relating to the Chapter 11 Cases,
including but not limited to risks relating to the Debtors' ability to satisfy
(or obtain waivers of) the conditions precedent to the Effective Date and the
Debtors' ability to pay the Administrative Expense Claims (as defined in the
Plan) (as they may be reduced under section 1129(a)(9) of the
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Bankruptcy Code) and therefore whether and/or when the Effective Date will
occur; with respect to distributions under the Plan, (i) the Debtors' ability to
make such distributions (including the timing and amount of proceeds to be
realized through the monetization of certain non-litigation assets and certain
litigation assets, including preference actions, prepetition related party
transaction claims against ESL and D&O insurance, and (ii) whether the actual
amount of Allowed Claims (as defined in the Plan) varies from the Debtors'
feasibility analysis and, if so, whether the variation is material; the
Company's ability to obtain Bankruptcy Court approval with respect to motions in
the Chapter 11 Cases, the effects of the Chapter 11 Cases on the Company and on
the interests of various constituents, Bankruptcy Court rulings in the Chapter
11 Cases and the outcome of the Chapter 11 Cases in general, risks associated
with third-party motions in the Chapter 11 Cases; risks related to the trading
of the Company's common stock and warrants on the OTC Pink Market, particularly
because the Plan states that the common stock and warrants will be cancelled on
the Effective Date; risks relating to the Company's ability to implement the
Plan; as well as other risk factors set forth in the Plan. The Company therefore
cautions readers against relying on these forward-looking statements. All
forward-looking statements attributable to the Company or persons acting on the
Company's behalf are expressly qualified in their entirety by the foregoing
cautionary statements. All such statements speak only as of the date made, and,
except as required by law, the Company undertakes no obligation to update or
revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Exhibit
99.1 Settlement Agreement
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