Ward Creditors’ Suit Allowed to Proceed

Montgomery Ward’s unsecured creditors won a bankruptcy judge’s approval of a liquidation plan for the defunct retailer and the right to sue its owner, GE Capital Corp., for at least $500 million.

U.S. Bankruptcy Judge Raymond Lyons approved the plan, which hinges on fraud claims by creditors against General Electric Co.’s GE Capital unit. Ward’s suppliers say GE Capital duped them into extending hundreds of millions of dollars in credit to the dying retailer before its bankruptcy filing in December 2000.

GE Capital failed to persuade 16,000 unsecured creditors to back a rival plan to drop the suit and accept payment of at least 20% on almost $400 million in claims. Under the plan Lyons adopted, unsecured creditors would get at least 4% of claims, and perhaps as much as 100%, if they win their suit.