US buyer Sears not paying Bangladeshi suppliers $50 million

American buyer Sears Holdings has put some two dozen Bangladeshi garment manufacturers in deep trouble as it is not paying its cash-starved suppliers for apparel exports worth $50 million.

Local garment exporters have been facing withholding and cancellation of orders worth around $3 billion as the Covid-19 pandemic has disrupted the global supply chain since March.

Some exporters were surprised to see that Sears was telling them to cancel orders that were shipped even three months ago.

Sears' update came as a big blow to Bangladeshi exporters who are under a threat to lose a few hundred millions after the bankruptcy move of another US retailer JCPenney and UK-based Debenham.

One of the exporters facing this unfortunate situation is Combined Apparels Limited in Chattogram. The company shipped goods to Transform Holdco LLC, a newly-formed concern of Sears Holdings Management Corporation, on February 27.

After 67 days of shipment, the buyer asked to consider the orders cancelled, saying the Covid-19 pandemic had affected it badly. It is also dilly-dallying to pay $0.7 million for exports made several months ago.

Earlier, the buyer committed to pay the amount in April. Now its officials say they will pay in instalments in May and June, and are also trying to convince Combined to export more.

"I asked them (Transform) to inform us of the matter through the banking channel. But on May 4, they sent an email asking us to consider all their orders cancelled, including those already shipped. They will not pay for that," Rakibul Alam Chowdhury, managing director of Combined Apparels, told The Business Standard.

Combined Apparels has about 950 employees, whose monthly wages amount to about Tk85 lakh. The factory owners have borrowed from banks in the last three months to pay workers with the hope that they will get payments from the buyer.

Rakibul's hope is now completely dashed as his outstanding bills to Sears stands at $1.7 million, equivalent to Tk14.45 crore which is enough to pay his workers for over a year.

"If they do not pay, I will go bankrupt," said a frustrated Rakibul.

He has sent a letter to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), informing it of the situation and asking for a solution through the diplomatic channel.

BGMEA sources said among the Bangladeshi suppliers, Sears has the highest outstanding bill of $13.48 million to NASA Group. Sears and its concerns also owe companies owned by incumbent BGMEA President Rubana Huq and former president Abdus Salam Murshedy a good sum.

Sears has about $0.5 million in outstanding bills to Mohammadi Group Limited owned by Rubana.

"We are tracking the issue and monitoring developments with Sears every day," she said.

"We are also working on a different platform to put pressure on the brand to respect the contracts made with the suppliers," she added.

Murshedy said the brand has $1.5 million in dues to his company.

"We have already sent an official letter to the brand, asking it to clear the dues," said Murshedy, who is the managing director of Envoy Group.

"We have some dues from last year and some from this year. The brand took time to pay us, but now they are taking advantage of their bankruptcy application," said Mesbah Uddin Khan, managing director of Wendy Apparels Ltd, a supplier of Sears.

"The brand did business smoothly after filing for bankruptcy. Now our dues are over $0.7 million," he added. 

Sears filed for Chapter 11 bankruptcy on October 15, 2018. After that, it is doing business by obtaining permission from court.

Transform Holdco LLC, formed on February 11 last year and registered as a private company, is to acquire some of the assets of Sears.