End of the Line for Venerable US Retail Giant?



POSTED BY Ed (11 mths ago)
Sears Holding Corp., which owns the Sears and Kmart stores and is run by hedge-fund manager Eddie Lampert, who is also its largest shareholder, pulled off another little trick when it announced today that it had lined up $200 million “to fund its operations,” but not cash, which is what Sears needs more than anything, given the rate at which it is burning it, but a Secured Standby Letter of Credit, which may be expanded to $500 million, “with the consent of the lenders.”

This announcement gives some clues that after many years of disappointment, Sears doom-and-gloomers might finally approach the end of their long wait:

Sears is scrounging up this financing right after the holiday selling season when retailers should be swimming in cash and profits. It’s their best time of year. But even that wasn’t enough for Sears.

The letter of credit is not from a bank, but from JPP, LLC and JPP II, LLC, which are affiliates of ESL Investments, which is Lambert’s hedge fund. Citibank serves only as “administrative agent and issuing bank.” In other words, no one outside of Lambert is still willing to lend to Sears.

The letter of credit is designed to soothe the nerves of Sears’ suppliers, which, fretting about not getting paid, might cut Sears off.

That suppliers are getting antsy has been an ongoing problem. But on December 16, according to Debtwire, “three sources familiar with the matter” said that suppliers were “requesting cash in advance before they agree to ship or are opting instead to avoid shipments altogether.” This “would mark a new chapter in the company’s ongoing descent, according to the sources.”

On December 8, Sears had reported another mega-loss, $748 million for the quarter – or $6.99 a share, the worst in over four years of bad losses – adding to its pile to cumulative losses, which after eight years of additions, has now reached $9.4 billion. Revenues plunged 12.5% year over year.

At the time, Sears said it had $258 million in cash as of October 29 and $174 million available to borrow via its revolving credit line. Not much, given the cash-burn rate.

Nevertheless, and with bitter irony, Sears assured its shareholders in the press release at the time that it was “fully committed to restoring profitability,” upon which its shares jumped 4.5% to $12.66, only to plunge 34% in the weeks since, sucker-punching, as Sears invariably does, those hardly souls that keep buying these shares on a wing and a prayer.

More http://wolfstreet.com/2016/12/29/2nd-half-2017-when-sears-files-bankruptcy/


Ed (10 mths ago)
Sear’s Bankruptcy, Who Gets the Real Estate, and How the Pension Fund Got Hung Out to Dry Invade Mnuchin’s Senate Confirmation Hearing

That Sears Holdings will file for bankruptcy appeared to be taken for granted in the confirmation hearings before the US Senate on Thursday. And when it does file, it’s going to get very complicated for Steven Mnuchin, the Trump administration’s appointment for Treasury Secretary. But the most fascinating part, for us as a non-political finance and economics site, is the dissection of the whole Sears deal.


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