Sears Holdings continues to strengthen its balance sheet with loans from CEO Eddie Lampert’s hedge fund, ESL Investments, and others, according to a filing with the Securities and Exchange Commission.
On Jan. 19, the company borrowed $30 million from the Term Loan Lenders and on Jan. 29 an amendment to the loan agreement garnered another $20 million, with a further $60 million borrowed from "certain unaffiliated lenders, bringing the total amount borrowed from the Term Loan Lenders and the Tranche A Lenders under the Term Loan Facility to date to $210 million," according to the filing.
The additional borrowing comes as the company announced layoffs of about 220 employees across various departments in the corporate office primarily, but not entirely, at its Hoffman Estates, IL, headquarters.
Sears earlier in the year announced new moves to boost profitability and liquidity — which at that point also included a loan from its CEO's hedge fund amid discussions to renegotiate terms on $1 billion in debt. At the same time the retailer also delivered the unpleasant news that same-store sales at Sears and Kmart for the first two months of the fourth quarter — which includes the holiday season — were down 16% to 17% respectively.
The restructuring plan is ostensibly to bring these two struggling banners to profitability, but in reality the company is frantically maneuvering to shore up its very viability. Bolstering the debt load is unlikely to help.
"The company is now in the painful position of having to balance its books," GlobalData Retail Managing Director Neil Saunders told Retail Dive in an email. "Sears has a toxic mix of issues, with dramatically falling sales and rising debt levels putting enormous pressure on the company's finances."
The loans outlined to the SEC are part and parcel of the company's approach in recent years. Sears has been pulling various levers and twisting knobs to keep operations rolling by monetizing assets (including real estate and brands), moving around debt, shuttering stores and laying off workers at its corporate offices.
The company last year sold its popular Craftsman tools line to Black and Decker for $900 million and has begun outsourcing the Kenmore home appliance brand. Along with yet another loan from CEO Eddie Lampert's hedge fund, Sears said last month that it had changed the advance rate for inventory under the second lien notes (to 75% from 65%) and is working on an agreement to improve terms in a $1 billion non-first lien debt. Lampert said in a blog post that if the retailer could not negotiate a refinancing agreement, it would "consider all other options to maximize the value of Sears Holdings' assets."
Sears has also accepted millions from Lampert, and the most recent loans are further evidence of the murky relationship between him, his hedge fund and Sears, as many increasingly see bankruptcy as inevitable for the once-powerful retailer. Lampert is also the chairman of Seritage Growth Properties, the real estate investment trust established in 2015. Meanwhile, as Sears sells much of its valuable real estate to the REIT, it owes rent on those same locations.
Such moves have helped keep the company's Kmart and Sears banners around for much longer than many observers had predicted, but it's done little for the retailers' sales or long-term prospects.