HOFFMAN ESTATES, Ill. — Shares in Sears Holdings fell by up to 16% after the company admitted in a public filing to “substantial doubt” about its ongoing solvency. The company warned that the sale of its Craftsman tool line to Stanley Black & Decker could be “voidable, in whole or in part” should a court in future decide either that Sears was already insolvent at the time of the sale, or that the sale caused or contributed to its insolvency. The $900 million deal was announced in January and effected earlier this month.
U.S. bankruptcy laws require judges to scrutinize recent sales in order to determine whether the proceeds should have gone to creditors instead. If the sale is ruled to be a “fraudulent conveyance”, Stanley could be compelled to “turn over value to other entities involved in the transaction and contemplated transactions for the benefit of unpaid creditors,” according to the filing. Stanley Black & Decker CEO James Loree acknowledged that the deal “has been a challenging transaction from the standpoint of risk management” but affirmed that his company has had “excellent legal support and we think we’re in a very good place”.
