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HOFFMAN ESTATES, Ill. — Sears Holdings Corp. has raised $100 million in new financing and is pursuing an additional $200 million.
The company also amended existing notes to increase its borrowing base advance rate for inventory and defer its collateral coverage test and restart it with the second quarter of 2018. Sears Holdings furthermore is in discussions with lenders regarding additional transactions to improve the terms on potentially more than $1 billion of its non-first lien debt.
The financial moves followed the retailer’s announcement that it is closing 103 Sears and Kmart stores nationwide between early March and April. Liquidation sales at the outlets being shuttered were to start as soon as January 12.
Sears Holdings will continue to evaluate the productivity of stores as it transforms its business model so that its store footprint and digital capabilities match the needs and preferences of customers. It will consider options to unlock value from its real estate portfolio, as well as the Kenmore and DieHard brands, Sears Home Services and Sears Auto Centers businesses, and continue to seek other potential sources of capital.
To further streamline operations to drive profitability, the retailer outlined incremental actions including cost reductions of $200 million on an annualized basis in 2018 unrelated to store closures.
“As previously announced, we are actively pursuing transactions to adjust our capital structure in order to generate liquidity and increase our financial flexibility,” said chief financial officer Rob Riecker. “The new capital we have secured represents meaningful progress towards those objectives and demonstrates that we continue to have options to finance our business.”
“We made significant progress in 2017 through our efforts to reset our cost base and enhance our liquidity, as well as our recently announced agreement with the PBGC [Pension Benefit Guaranty Corp.] to prefund our contributions to our pension plan for the next two years,” said chairman and chief executive officer Edward Lampert. The latest initiatives “build on those achievements and make clear our determination to remain a viable competitor in the challenging retail environment. The financial transactions we are pursuing and incremental cost actions are designed to accelerate our return to profitability and enable Sears Holdings to increase our investment in the most promising opportunities in our enterprise, including our Shop Your Way network and our Sears Home Services business.”
Standard & Poor’s Global this month lowered Sears Holdings’ corporate credit rating deeper into “junk” status, from CCC to CCC-. The downgrade indicates significant speculative characteristics for the debt.
