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A woman walks by a Sears store in Brooklyn on October 15, 2018 in New York City. The iconic American retailer has filed for Chapter 11 protection from creditors early on Monday, listing more than $10 billion in debts and more than $1 billion in assets.
Sears has survived the Great Depression and world wars. Whether the 126-year-old retailer stays afloat or goes out of business now hinges in part on paying for the enormous bill piled up by going broke.
The fate of Sears Holdings Corp highlights a harsh reality of U.S. bankruptcy: It requires armies of pricey specialists in a system driven by an outcome, not costs.
On Monday, Sears will consider bids for its assets, including a last-ditch $5 billion proposal by chairman and controlling shareholder Eddie Lampert.
To ensure his chances of outbidding proposals to liquidate the chain, Lampert last week agreed to assume more than $600 million in additional liabilities that Sears has incurred since filing for bankruptcy protection last October.
Those so-called administrative claims includes taxes, and payments to vendors and the professionals advising Sears.
“The fees in a case like this will be tremendous, you’ve got people working round the clock,” said David Wander, bankruptcy attorney at Davidoff Hutcher & Citron. “A massive case requires a massive amount of legal talent.”
Sears, which also owns the Kmart discount chain, is picking up the tab for six law firms, three investment banks, two financial advisers and seven others that are providing tax, real estate advice and other services, according to court filings.
Although the final tally will not be known until the case ends, the fees mount quickly.
The law firm of Weil, Gotshal & Manges, for example, billed Sears about $5 million for the first two weeks after it filed for Chapter 11 bankruptcy protection on Oct. 15, according to court documents.
Weil did not respond to a request for comment. Sears declined to comment.
Bankruptcy veterans said the fees reflect the realities of Chapter 11, which can inflate costs: only a handful of law firms can put scores of experienced staff on a case on short notice. Corporate leaders are happy to pay top dollar when the company’s survival is on the line.
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