Sears raises $100M in new financing, plans more cuts

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Sears raises $100M in new financing, plans more cuts

By Gina Acosta - 01/10/2018

Sears has secured $100 million in new financing, will seek twice that from other sources, and will attempt $200 million in additional cost cuts this year unrelated to store closings.

Sears Holdings, which said last week it would close more than 100 stores, said Wednesday that during the holiday shopping season, same store sales decreased by about 17 percent.

The company outlined incremental actions to further streamline its operations to drive profitability, 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 Rob Riecker, Sears Holdings' Chief Financial Officer. "The new capital we have secured represents meaningful progress towards those objectives and demonstrates that we continue to have options to finance our business."

Sears Holdings has initiated a series of financial transactions to raise an incremental $300 million in new liquidity. The company has already received a $100 million term loan, supported by ground leases and select intellectual property. Under certain circumstances and with the consent of the lender, the company will be entitled to raise an additional $200 million against the same collateral. 

In addition, the company is in discussions with certain lenders regarding additional transactions to enhance its liquidity and strengthen its balance sheet through a series of agreements that would improve the terms on potentially more than $1 billion of its non-first lien debt, including significantly reducing cash interest expense and extending the maturity of some of that debt. 

"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 to pre-fund our contributions to our pension plan for the next two years," said Edward S. Lampert, Chairman and Chief Executive Officer of Sears Holdings. "The initiatives we have announced today 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. Our leadership team is more aligned and committed to the transformation of Sears Holdings than ever before. With the support of our associates, we hope to work constructively with our investors, vendors and other constituents to facilitate the actions we are announcing today."

Sears says it will continue to strategically evaluate the productivity of its Kmart and Sears stores as the company transforms its business model so that its physical store footprint and its digital capabilities match the needs and preferences of its members.

In addition, Sears Holdings will continue to evaluate strategic options to unlock value from its real estate portfolio, as well as its Kenmore and DieHard brands and its Sears Home Services and Sears Auto Centers businesses, as well as continue to seek other potential sources of capital.