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Sears sues to recover payments made to bike vendors prior to bankruptcy

Published April 2, 2020

NEW YORK (BRAIN) — Sears Holdings Corporation, which filed for bankruptcy in late 2018, is trying to recover millions of dollars in payments it made to vendors in the days prior to the filing. Bell Sports, Kent International, Cycle Force Group, and Bicycle Doctor of Broward, a Florida mobile service and bike assembly company, are among the companies being sued.

Generally bankruptcy trustees can recover so-called "preferential" payments made in the three months prior to a bankruptcy filing so that that money can be added to the debtor's assets and eventually distributed equally among all unsecured creditors. The company has to show that it was insolvent during the 90-day period, however, which is one way those vendors can fight the recovery process in the bankruptcy court.

On Thursday Sears, on behalf of its Kmart division, sued Bell Sports to recover $125,000 in payments. Sears had sent a demand letter to Bell last August seeking a return of the payments. 

Sears filed a similar suit against Kent International in January, to recover $88,000. In November it sued Cycle Force Group to recover $30,000 and The Bicycle Doctor to recover the same amount. 

Kent, Cycle Force Group and The Bicycle Doctor also are among the company's unsecured creditors. Kent is owed about $115,000, Cycle Force Group is owed about $83,000 and the Bicycle Doctor is owed about $15,000. Dorel Industries, the parent company of Cycling Sports Group and Pacific Cycle, is owed nearly $700,000, although that could be related to Dorel's furniture or juvenile divisions, not its bike businesses. 

According to one report last fall, Sears was hoping to recover about $50 million in preferential payments and planned to repay unsecured creditors about 2.5 cents on the dollar. 

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