Sears Taps Bill Gates's Fortune in Latest Borrowing
April 08 2016 - 3:20PM
Dow Jones News
Hedge-fund manager Eddie Lampert continues to pump money into
Sears Holdings Corp. but for the retailer's latest financing it
also tapped another billionaire's fortune.
The retailer Friday said it raised $500 million in financing
backed by mortgages on 13 properties. Sears said the backers
include affiliates of Mr. Lampert's hedge fund, ESL Investments
Inc., and Cascade Investment LLC, the investment firm that manages
most of Microsoft Corp. co-founder Bill Gates's wealth.
A spokesman for Mr. Lampert declined to comment. Cascade didn't
immediately return a call seeking comment.
Sears has been seeking fresh financing since it ended January
with $238 million of cash and cash equivalents. Sears said last
month it had priced a $750 million loan, which closed Friday. Mr.
Lampert's fund acquired a portion of the $750 million loan,
according to Reuters.
The financial support underscores the deep and unusual
relationship between Sears and Mr. Lampert, who took over the
company in 2005 and merged it with Kmart. He is chairman and chief
executive of the company and his fund controls nearly 55% of the
shares outstanding.
Sales at Sears have plunged and the company has posted five
straight years of losses. The company lost $1.13 billion in the
fiscal year ended Jan. 30, on top of a $1.68 billion loss a year
earlier. Sales fell 19% to $25 billion.
Sears shares rose 0.6% in afternoon trading to $14.43. But the
stock is down 67% over the past 12 months.
Sears is also trying to raise an additional $300 million through
asset sales or other means. Taken together, the funds would provide
the company with $1.5 billion in liquidity.
Monica Aggarwal, a Fitch Ratings analyst, estimates that after
the loans raised Friday, Sears would still need an additional $1
billion to $1.25 billion to fund operations this year.
A Sears spokesman said the company has sufficient financial
resources. He noted that at the end of the fourth quarter, the
company had $4.2 billion in liquidity and assets that could be
converted into cash, including available borrowing capacity and
inventory. He said the company has a wide range of financing
options available under its credit facility.
Mr. Lampert has long been a Sears lender. In the past he has
bought its commercial paper. But those loans were unsecured. Then
in September 2014, he provided $400 million in short-term financing
backed by 25 Sears properties. The loan was initially due in just
over three months, but was extended and eventually paid off in June
2015.
He has also helped prop up the company by buying shares in
entities it has spun off, including a portfolio of real estate that
in addition with other transactions raised $2.7 billion last year.
Those stores are now owned by Seritage Growth Properties.
Sears has immediate access to $250 million of the $500 million
loan announced Friday, which matures in July 2017. If it draws down
the remaining amount, the company will have to provide eight
additional properties as further collateral.
Sears hired Eastdil Secured to syndicate the loan. The ESL
affiliates and Cascade kicked in $125 million, and have committed
to providing any portion of the loan that isn't syndicated to other
lenders.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
(END) Dow Jones Newswires
April 08, 2016 15:05 ET (19:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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