ESL Investments responds to ‘baseless’ allegations in Sears lawsuit
ESL Investments has responded to the federal lawsuit filed on Thursday by Sears Holdings Corp.
The suit that accuses former CEO Eddie Lampert, his ESL Investments hedge fund and others associated with Sears of stripping the chain of some two billions of dollars worth of assets even as the retailer racked up huge losses.
In a statement emailed to Chain Store Age, ESL Investments said it “vigorously disputes” the claims in the complaint, which repeats “baseless allegations and fanciful claims. “As we have previously said, the debtors’ allegations are misleading or just flat wrong.”
The lawsuit was filed by the restructuring team winding down Sears’ bankruptcy estate and suing on behalf of creditors, many of whom blame Lampert for the retailer’s downfall. Among other things, it cited sales or spinoffs of key assets that were allegedly used to profit Lampert and ESL, including the spinoff of Lands’ End in 2014 and Lampert’s real estate investment trust Seritage Growth.
Here is ESL’s complete statement:
“ESL Investments, Inc. vigorously disputes the claims in the debtors’ complaint against ESL, Mr. Lampert and Mr. Kamlani, which repeats baseless allegations and fanciful claims. As we have previously said, the debtors’ allegations are misleading or just flat wrong.
The complaint completely ignores that the company’s market value ranged between $2.5 billion and $5.0 billion during the period when these transactions took place, which demonstrates the company’s solvency and supports the solvency opinions the company received from a notable expert in conjunction with such transactions.
In addition, the company received proceeds in excess of $3.0 billion from these transactions, all of which were applied to reduce debt and fund operations, and all of the referenced transactions treated every shareholder equally from an economic standpoint.
ESL was a constant source of financing for Sears Holdings over many years, including through the extension of $2.4 billion in various secured financings to the company.
These financings and other transactions involving Sears’ assets were undertaken to facilitate the company’s continued operations and implement its transformation plan. All transactions were done in good faith, on fair terms, beneficial to all Sears stakeholders and approved by the Sears Board of Directors, made up of a majority of independent directors, as well as the company’s Related Party Transactions Committee, which was itself comprised of independent directors and advised by separate independent financial and legal advisors.
We are confident that the processes we followed for each of these transactions are unimpeachable. We reject the debtors’ allegations and will vigorously contest their complaint concerning these transactions.”
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