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Sears Prepares for a Big Holiday Season, Bankruptcy and All

ABI Bankruptcy Brief
ABI Bankruptcy Brief
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November 1, 2018

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ABI Bankruptcy Brief

Sears Prepares for a Big Holiday Season, Bankruptcy and All

Sears Holdings Corp. may have filed for bankruptcy, but it’s still positioning itself as a holiday shopping destination, Bloomberg reported today. Even as the 125-year-old retailer continues to search for a loan to stave off liquidation, it’s stocking its shelves even fuller than in previous holiday seasons in a bid to entice customers who might not even realize it’s still operating. “We are leaning into the holiday and we intend to win this season,” said Peter Boutros, the chief brand officer for Sears and Kmart. The department store, which filed for bankruptcy on Oct. 15, said in the filings that it plans to close 142 stores and focus on operating the remaining ones well during the holiday season. Sears actually saw a boost in sales in recent weeks, said Boutros, who is also president of the Kenmore, Craftsman and DieHard brands. A company lawyer also told a judge last week that Sears was doing better than expected and doesn’t have “a significant liquidity need right now” after the company postponed plans to finalize the second piece of a bankruptcy loan.

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Occupancy issues are at the heart of many significant retail cases, as detailed in the ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store.

Analysis: Bitcoin Turns 10: Still Not All Grown Up

It has been a decade since the digital currency bitcoin was born, and in that time it has become a source of fascination for investors, speculators, true believers and skeptics around the world. What it hasn’t become, though, is the one thing it was built to be: a payments system, the Wall Street Journal reported yesterday. Bitcoin’s roots go back to Oct. 31, 2008, when a person or group using the pseudonym Satoshi Nakamoto released a nine-page white paper describing a “peer-to-peer electronic cash system.” The paper outlined a way for consumers to pay each other on a digital platform that mimicked cash transactions — but without the need for the government backing required for traditional currencies. After a few years as mainly a techie project, it broke into the mainstream around 2013. Stories of overnight fortunes were matched by stories of drug traffickers and Ponzi schemers. Tools for using it were clunky, but the system did work. And with bitcoin trading at under $200, a lot of people started experimenting. A protracted fight among developers contributed to short-circuiting bitcoin’s payments growth. The bitcoin network was built in a way that it could process only about seven transactions per second, a technical limitation inserted by Nakamoto. If that limit was hit, users could pay a voluntary fee to essentially skip the line for their transaction. Then bitcoin’s price went on a manic rally in 2017, soaring from under $1,000 to nearly $20,000 and attracting a whole new crowd of novice investors. Surging traffic on the network led to widespread bottlenecks, with fees rising as high as $54 per transaction in late 2017. (Subscription required.)

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Don't miss the "Cryptocurrency, Blockchain and Other Breaking News" session at ABI's Winter Leadership Conference in December. This panel will discuss the impact of cryptocurrencies on the financial industry and how to litigate the complex issues they bring. Click here to register.

Justices Weigh Class-Action Limits in Arbitration Contract

The Supreme Court seemed prepared on Monday to rule that workers at a California business could not band together in an arbitration proceeding to seek compensation for what they said was their employer’s failure to protect their data, the New York Times reported. The case was the court’s latest effort to determine whether companies can use arbitration provisions to bar class actions in court and in arbitration proceedings. In cases concerning fine-print contracts with consumers and employment agreements, the court has ruled that arbitration provisions can require disputes to be resolved one by one. Monday’s case, Lamps Plus v. Varela, No. 17-988, presented a slightly different issue. The arbitration provision in the employment agreement in question did not specifically bar class actions and said that “arbitration shall be in lieu of any and all lawsuits or other civil legal proceedings relating to my employment.” That language, a divided three-judge panel of the Ninth Circuit ruled, meant that workers could pursue their claims as a class in the arbitration proceeding. In an unsigned opinion, the majority said that this language allowed the workers to band together. “A reasonable — and perhaps the most reasonable — interpretation of this expansive language is that it authorizes class arbitration,” the majority said. Click here to read a transcript of the oral argument.

Analysis: Baby Boomers Are Still Living at Home, Presenting Challenge for Senior-Housing Developers

It seemed to be one of the surest bets in real estate: build senior-housing facilities that cater to aging baby boomers who will require more care. The problem is, boomers haven’t much cooperated, according to a Wall Street Journal analysis yesterday. The supply of senior housing has soared in recent years after many investors struck on the same idea. The market has added 84,727 units since the end of 2012, up from 59,136 units during the six years before, according to the nonprofit National Investment Center for Seniors Housing & Care. But much of that senior housing hasn’t been needed. Many in the generation born between 1946 to 1964 have remained fitter and more independent, or stayed closer to their families, than many developers anticipated. And since recent demographic data suggests people tend to move into senior-living facilities after they reach 82 years old — the oldest boomer won’t turn 80 until 2026 — many of these facilities have arrived ahead of their time. “What’s happened to the industry is that everyone sees the demand, and they can’t quite figure out exactly when to time it,” said Lucinda M. Baier, chief executive officer at Brookdale Senior Living Inc., the largest operator of senior housing in the U.S. Occupancy rates for senior housing stood at 87.9 percent in both the second and third quarter — the lowest rate since 2011, when it reached 87.5 percent, according to NIC, which tracks market-rate properties. (Subscription required.)

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Examine how current challenges facing the health care industry will lead to future opportunities. Don't miss ABI's “Disruption, Consolidation and Innovation in the Health Care Industry” Program, scheduled for January 17 at Georgetown University Law Center. Register here.

Notice to All ABI Members

UNITE HERE Local 11 is a labor union based in southern California. They represent more than 20,000 workers in the hotel and restaurant industry. The union has been attempting to organize employees at the Terranea Resort, site of ABI’s 2019 Winter Leadership Conference (WLC). The union has repeatedly contacted ABI leadership, including members of the board and committee leaders, to urge ABI to cancel or move the WLC. ABI has no plans to move or cancel the event, which would result in substantial legal exposure. If you are contacted by phone or email by representatives of the union, ABI encourages you to ignore rather than engage or respond. ABI regrets this development and will continue to closely follow events at the property. This has no effect on the ABI’s 2018 WLC, set for Scottsdale, Ariz., this December.

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New on ABI’s Bankruptcy Blog Exchange: How Freddie Mac's Preparing for Day It Might Enter Private Sector

When the mortgage giant will be released from government control is anyone's guess, but the company's third-quarter report shows signs of an easier transition, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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