Sears Gets $500 Million Loan, With Real Estate Deal in Mind

  • CEO lending money to company ahead of sale of its properties
  • Retailer previously generated $2.7 billion with REIT spinoff

The Numbers Don't Lie: Sears’ Financial Relief

Sears Holdings Corp. is banking on making another big real estate deal.

Chief Executive Officer Eddie Lampert has agreed to loan the company $500 million, secured by Sears’s properties, in anticipation that a future sale of its sprawling real estate could help pay back debts.

Sears previously generated a big payday from its properties in 2015. That’s when it spun off 235 stores into a real estate investment trust -- a transaction that raised about $2.7 billion. Sears has continued to operate many of the stores through a leaseback arrangement, but it’s also steadily reduced its footprint by shutting down locations.

The company’s main business -- department stores -- has continued to hemorrhage cash in recent years. And that’s prompted Lampert, a hedge fund manager, to repeatedly step in and provide financing to the struggling chain.

The latest loan matures in July 2020, according to a statement Wednesday. It will provide $321 million in funding now and an additional $179 million in the future, the Hoffman Estates, Illinois-based company said.

The funding will “support our operations as we meet all of our financial obligations,” Chief Financial Officer Jason Hollar said in the statement.

Investor Relief

Last month, Sears announced that it would be getting a letter of credit worth as much as $500 million through affiliates of Lampert’s firm, ESL Investments Inc. The move helped reassure investors, who’ve grown increasingly concerned about the chain’s plummeting sales and mounting red ink.

Sears jumped 10 percent on Dec. 29, the day the letter of credit was disclosed. They rose an additional 1.8 percent to $9.89 on Wednesday.

Earlier in December, Sears reported another huge quarterly deficit -- $748 million -- bringing its total losses to about $9.4 billion in the past eight years. Christina Boni, an analyst at Moody’s Investors Service, has said that the company needs to raise roughly $1.5 billion to make it through 2017 comfortably.

The loan announced Wednesday bears an 8 percent rate and is meant to help finance the company while it sells a new portfolio of real estate.

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