• Wednesday, Jan 19, 2022
  • Last Update : 03:32 am

Sears to face legal action from Bangladeshi RMG suppliers

  • Published at 08:55 pm June 6th, 2020

According to the suppliers' lawyers, more than $21 million of their clients’ products have already been shipped and are being stored by Transformco’s carriers in US ports

Lawyers of 19 Bangladeshi readymade garment (RMG) factory owners have threatened to take legal action against the parent company of American retailer Sears for allegedly refusing to settle more than $40 million in outstanding dues.

They alleged that Transformco, a privately held company owned by American billionaire Eddie Lampert’s ESL Investments hedge fund, the current owner of Sears Holdings, “willingly misrepresented” its finances to convince suppliers to extend its credit, reports Sourcing Journal.

Transformco did not immediately respond to requests for comment.

According to the suppliers' lawyers, more than $21 million of their clients’ products have already been shipped and are being stored by Transformco’s carriers in US ports.

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

More than two dozen Bangladeshi suppliers are in similar “deep trouble” after Sears Holdings allegedly canceled or withheld orders. 

“Sears Holdings is not paying us,” Rakibul added.

The suppliers have been informed by Transformco’s shippers that “the buyer has abandoned the cargo,” the lawyer’s wrote in a letter to Transformco, Sourcing Journal quoted Apparel Insider, who first broke the story.

They further claim that following Transformco’s acquisition of Sears in January 2019, the company’s executives, abetted by third-party sourcing agents such as Triburg Consultants and Li & Fung, “induced suppliers around the world to extend millions of dollars of trade credit.”

Transformco, the lawyers added, has “now led the suppliers over a financial cliff that has jeopardized their businesses and impacted the jobs of thousands of their employees” who face “severe hardship and even starvation” due to what they call a “breach of contract.”

Transformco has been given till Monday (June 8) to respond.

If the matter continues to be unresolved, the lawyers 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 help slow the spread of the Covid-19 contagion.

As of June 5, Sears has reopened 53 locations across the United States.

The Bangladeshi apparel sector may lose as much as $5 billion in the outgoing 2019-20 fiscal year due to the slump triggered by the global coronavirus pandemic Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Rubana Huq said on Thursday.

The factories are now running at only 55% percent capacity due to lesser work orders, she added.

"It will be not possible for factories to keep all of their workers as they are now running at almost half of their capacities due to less orders. Owners might have to lay off workers from as early as this month,” said Huq.

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