Sears had an average of $230 million of commercial paper outstanding to Lampert’s ESL Investments Inc. in fiscal 2011, compared with $204.7 million the previous year, according to a similar filing on April 11.
The retailer, which owns Kmart as well as Sears, is spinning off about 1,250 smaller-format stores, and selling 14 North American sites, moves that the company said it expects to bring in as much as about $942 million. On a Feb. 23 conference call, Robert A. Schriesheim, chief financial officer of Hoffman Estates, Illinois-based Sears, said the company has ample liquidity including a $3.28 billion revolving credit line with no active financial covenants. Sears had $754 million of cash on its books on Jan. 28, he said, down from $1.36 billion at the end of the previous fiscal year, according to data compiled by Bloomberg.
As of Jan. 28, ESL held about 74 percent of Sears’s $337 million in commercial paper, according to the company’s annual report.
“Sears posts rates at which it is willing to borrow via commercial paper and various parties including ESL may lend,” spokeswoman Kimberly Freely said today in an e-mail. “The funds are used for general corporate purposes.”
ESL lends at “substantially the same terms,” according to the filing today.
“It’s a little unusual that a company with ratings as low as they have would be able to access the commercial paper market, but it’s only because they have this relationship with ESL” that Sears is able to do so, said James Goldstein, an analyst at CreditSights Inc., a New York debt-research firm.
Corporations sell commercial paper, typically maturing in 270 days or less, to fund everyday activities such as paying rent and salaries.
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