Sears urged to sell $1.5 billion in real estate to stay afloat

Irving Hamilton
September 25, 2018

In the filing, Lampert's hedge fund said it "must act immediately to have sufficient runway to continue its transformation" if Sears is to become profitable again.

Eddie Lampert, who owns the hedge-fund ESL Investments and is also the retailer's largest shareholder and creditor, has asked creditors to refinance $1.1 billion in debt before a $134 million debt payment is due October 15, according to a Sunday filing with the U.S. Securities and Exchange Commission.

ESL holds a controlling interest in Sears Holdings. Sears, which hasn't turned a profit since 2010, a year ago posted a loss of $383 million. The retailer closed its last Sears store in Chicago in July and has announced plans to close another 46 stores by November, including a Kmart in Steger and a Sears in Bloomington.

Lampert's latest attempts may provide a short-term life line, but analysts said that it is not a sustainable plan for a company that has failed to reinvent itself in an era of online shopping.

He wrote that he still thinks Sears can get back to profitability as a smaller company, but that it needs to slash debt and use its remaining assets to generate cash.

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He also said it was in the best interest of stakeholders to "accomplish this as a going concern" - language that suggested the company could be forced out of business.

Lampert also proposes selling another $1.5 billion in real estate.

Sears debt already has the lowest possible credit rating from Standard & Poor's, which suggests it could default on debt within the next six months. That would leave the company with $1.2 billion in outstanding debt, freeing up cash to invest in the retail business.

The hedge fund, in the filing made public on Monday, urged the retailer's board to sell US$1.5 billion more in real estate and restructure US$1.1 billion in debt. In August, he offered to have the hedge fund buy Kenmore for $400 million, and to purchase its home service business for as much as $80 million more. He did not identify what other assets could be sold to raise that kind of money.

Sears said any transaction would need the approval of its board and a subcommittee overseeing transactions with related parties.

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