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Rosy Blue Objects to Sears Sell-Off Plan

Oct 24, 2018 10:06 AM   By Rapaport News
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RAPAPORT... Rosy Blue and Vijay Gold Designs have challenged Sears Holdings Corp.’s store-liquidation plans, claiming that some of the assets it wants to sell off are consignment goods.

Sears filed for Chapter 11 bankruptcy protection earlier this month, saying it would close 142 stores and sell off their inventories. However, those proposals do not protect suppliers that have consigned products to the retailer, Rosy Blue and Vijay Gold — the trading name for Shanti Corporation — claimed in separate court filings Monday.

“In the store-closing motion, the debtors seek authority to, among other things, liquidate all of the inventory at the closing stores, whether they own it or not,” Rosy Blue said in its “limited” objection. “The store-closing motion fails to address the inventory belonging to Rosy Blue or other consignors, and fails to provide for any adequate protection to Rosy Blue or other consignors in connection with the store-closing sales.”

Credit memoranda — or memos — enable jewelers to obtain goods from suppliers without the inventory cost, and pay for them when they make a sale. Both vendors entered such agreements with Sears in September 2013 to supply jewelry products to the now-bankrupt retailer, according to the documents. They subsequently filed a legal statement that ensured the jewelry would not be mislabeled as Sears’ assets in the case of bankruptcy — known in technical terms as “perfecting the security interests.”  

In their arguments, Rosy Blue and Vijay Gold cited the 2008 bankruptcy of Whitehall Jewelers Holdings, in which a court ruled that it could only sell consigned goods if it had the supplier’s consent or provided it with adequate protection.

Sears’ attorney declined to comment, as did Rosy Blue. Vijay Gold’s attorney was not available for comment at press time.

Image: A Sears store. (Andriy Blokhin/Shutterstock)
Tags: bankruptcy, chapter 11, consigned goods, consignment, Credit memoranda, liquidation, memo, memos, Rapaport News, rosy blue, sears, Sears Holdings Corp., Shanti Corporation, UCC, Uniform Commercial Code, Vijay Gold Designs, Whitehall Jewelers Holdings
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