Thanh Cong falls foul of Sears mess

Thanh Cong is owed around $4.1 million from US giant Sears but may find it tricky to recover the debt, Photo: Le Toan

According to Nguyen Thanh Ha, managing partner of SBLaw Company, Vietnamese companies should look carefully at business contracts to seek out provisions which could protect their rights and interests, or stipulate sharing risk among parties in case the unthinkable occurs.

“Businesses should carry out tasks quickly and proactively in order to get any compensation they are due in an early fashion, such as preparing documents, collecting data and information related to transactions and other parties, and seeking legal support from those who deal in similar cases of international trade,” emphasised Ha.

Ha’s advice came after the case of the US retail titan Sears Holdings which has filed for bankruptcy and owes Vietnamese textile firm Thanh Cong Textile Garment Investment Trading JSC (TCM) about $4.1 million.

Ha said that US ­Bankruptcy Court will calculate how much property Sears has left and how to repay in turn. The first priority is Sears’ employee salaries, followed by federal taxes, payment for ­suppliers of goods and ­services, and finally bank loans.

Thanh Cong’s ability to seize debts from Sears depends on numerous elements such as the giant’s remaining assets, the number of employees and their rights, and the fulfilment of financial obligations to the state and other creditors.

“In my opinion, it is very difficult to identify the debt recovery ability of Thanh Cong in this case,” said the SBLaw managing partner.

Consideration of legal provision of the country’s partner is also due. If ­bankruptcy procedures and order of handling property under the US bankruptcy rules is understood by TCM, the Vietnamese company could send the letters to take part in the bankruptcy case in the US based on the legal ­provisions to protect their rights and interests.

“Additionally, assistance from experienced and ­reputable lawyers in the ­international trade sector is essential in legal proceedings,” added Ha.

Sears filed for bankruptcy after failing to make a $134 million debt payment tranche. Its subsidiaries, partners Roebuck and Kmart, contribute about 7 per cent to TCM revenue every year. Sears’ remaining debt to TCM is VND95 ­billion ($4.1 million), equivalent to 3 per cent of the Vietnamese firm’s total ­assets, according to TCM’s third quarter report.

Tran Nhu Tung, director at TCM, told VIR that his company is still awaiting a decision from the US court [US Bankruptcy Court] on the ­proceedings the retail chain filed in October 2018. “We have also been trying to ­negotiate with Sears to switch from pay-after-delivery to a letter of credit, and our company has made a provision to offset our bad debts,” he said.

According to Tung, Sears had ordered certain fabrics to produce fashion ­products. As they were being made to specific designs, the company would find it hard to sell them on, even if Sears ended up returning them. ­Exports account for 88 per cent of TCM’s revenues.

In January, a bankruptcy judge approved Sears ­chairman Eddie Lampert’s deal to pour around $5 billion into restructuring the company, which would ultimately keep the company and its 400 stores in operation.

Previously in a similar case, the 2016 bankruptcy of Hanjin Shipping Global, South Korea’s largest and the world’s seventh-largest ­container shipping company, affected Vietnamese business export and import as well as activities related to around 5,000 containers, causing a huge amount of costs for ­storage at international ports, which was estimated at ­hundreds of billions of ­VND. It was reported that the South Korean company had run up a debt of about $2.5 million to Ho Chi Minh City-based Saigon Newport Corporation, and over $200,000 to other ports in northern Vietnam.