Sears Takes More Steps to Shore up Finances

If the refinancing effort is not successful, the company "will consider all other options" to maximize asset value.
Matthew HellerJanuary 10, 2018

Sears Holdings said Wednesday it was taking additional steps to restructure its balance sheet amid skepticism that it can be a viable retail competitor in the long term.

The measures include a series of financial transactions to raise an incremental $300 million in new liquidity and a restructuring of more than $1 billion in debt.

The company also warned that if its efforts to complete the refinancing were not fully successful, “the company’s board will consider all other options to maximize the value of Sears Holdings’ assets.”

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Sears’ previous turnaround efforts have included closing unprofitable stores, selling the Craftsman tool brand to Stanley Black & Decker and, most recently, reached an agreement with regulators to pre-fund its contributions to its pension plan for the next two years.

“While these actions have so far helped our company survive the so-called ‘Retail Apocalypse’, many observers are not persuaded that Sears Holdings can be a viable competitor in the long term,” CEO Eddie Lampert said Wednesday in a blog post. “It is obvious that to overcome such skepticism and obtain the support of outside lenders and our vendor community … we need to undertake further measures.”

He described the additional financial maneuvers as “broader, more fundamental changes in our capital structure and business model” that will enable Sears to “move forward with greater financial flexibility and more capital to invest in the most promising areas of our business.”

Possibly confirming the skepticism, however, Sears also announced that comparable store sales at Sears and Kmart for the first two months of the fourth quarter fell in the range of 16%-17% and it now expects a fourth-quarter adjusted loss of $10 million to $70 million, compared with a loss of $61 million a year ago.

“Despite brighter sales in the department store sector this holiday season, Sears continued to significantly underperform with comparable store sales declining in the range of 16-17% for the November/December period,” Moody’s analyst Christina Boni wrote in a note to clients.

The new capital includes a $100 million loan, with another $200 million potentially being available from the same lender.