Sears Owner Faces $40 Million Lawsuit from Bangladeshi Suppliers: Report

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The parent company of Sears Holdings has been threatened with legal action after allegedly refusing to stay more than $40 million of outstanding debt using its garment suppliers in Bangladesh.

Lawyers for 19 factory owners, as reported exclusively by Apparel Insider, are demanding that Transformco, a privately held company owned by by American billionaire Eddie Lampert’s ESL Investments hedge fund, are demanding immediate payment amid claims that Transformco “willingly misrepresented” its finances to convince suppliers to extend it credit.

Transformco didn't immediately react to requests for comment.

According to lawyers, a lot more than $21 million of their clients’ products have already been shipped and so are being placed by Transformco’s carriers in U.S. ports.

“I sent the shipment worth $6 million for [Transformco] however the company suddenly called me for cancelling the order,” Rakibul Alam Chowdhury, managing director of Combined Apparel, told local news agency Bangladesh Sangbad Sangstha in May.

More than two dozen Bangladeshi suppliers are in similar “deep trouble” after Sears Holdings allegedly canceled or withheld orders. “[Sears Holdings] isn't paying us,” Chowdhury said.

The suppliers have already been informed by Transformco’s shippers that “the customer has abandoned the cargo,” the lawyer’s wrote in a letter, seen by Apparel Insider, to Transformco. “The carriers are actually threatening to market or destroy the products.”

They further declare that following Transformco’s acquisition of Sears in January 2019, the company’s executives, abetted by third-party sourcing agents such as for example Triburg Consultants and Li & Fung, “induced suppliers all over the world to extend huge amount of money of trade credit.” Transformco, the legal representatives added, has “now led the suppliers over a financial cliff that has jeopardized their businesses and impacted the jobs of a large number of their workers” who face “severe hardship and even starvation” because of what they call a “breach of contract.”

For that reason, Transformco action’s have “contributed to an evolving humanitarian disaster in Bangladesh and elsewhere in Asia,” the legal representatives wrote.

Transformco has been given till June 8 to respond. If the problem is still unresolved, the legal representatives say their clients may seek Transformco’s involuntary bankruptcy for non-payment of debts.

In early April, Transformco, which also owns Kmart, temporarily closed all Sears stores-but not distribution centers or customer care-in a bid to to greatly help slow the spread of the COVID-19 contagion, which had just begun gripping the nation. Kmart stores and Kmart Pharmacy spots remained open to provide “essential services and products.” By June 5, Sears has reopened 53 places across the USA. Less than 190 Kmart and Sears stores remain after hundreds were shuttered in the last few years because of financial struggles.

Bangladesh’s garment sector, the world’s second-largest exporter of clothing after China, has seen more than $3 million in canceled orders because of tightening pursestrings amid the pandemic, in line with the Bangladesh Garment Manufacturers and Exporters Association (BGMEA). Rubana Huq, the trade group’s president, warned Thursday that the united states could see an “irrecoverable loss” of $5 billion by the finish of the fiscal year because of vanished business.

Following criticisms that factories were being reopened prematurely, the BGMEA says it'll open a laboratory in Bangladesh to test workers for COVID-19. The facility, run by the BGMEA and the Diabetic Association of Bangladesh, will test up to 180 samples daily from Saturday. Another two laboratories for personnel are slated to open soon, Huq said.

“It’s a state-of-the-art lab… personnel will get first preference in here,” Huq told the Thomson Reuters Foundation Friday. “[We] need data on COVID-19. So if staff or factories register through us, we are able to adopt an industry-wide practice of precaution and isolation.”

The Dhaka Tribune reported Wednesday that 187 garment personnel have already been infected with COVID-19 since factories started returning online on April 26. Of the positive cases, 126 are from 51 BGMEA member factories, 58 from 21 Bangladesh Knitwear Manufacturers and Exporters Association member factories, and three from two Bangladesh Textile Mills Association member factories.
Source: https://sourcingjournal.com

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