Sears Holdings Corp (NASDAQ:SHLD), the struggling retailer headed by Edward Lampert, indicated in its March 18 regulatory filing with the Securities and Exchange Commission (SEC) that its outstanding unsecured commercial paper declined to $9 million as of February 1, 2014.

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Last year, the unsecured commercial paper borrowings of Sears Holdings Corp (NASDAQ:SHLD) was $345 million. According to the company, ESL Investments held $285 million of its unsecured commercial paper including $169 million held by Lampert in 2013. This year, Lamper and his hedge fund stopped acquiring Sear’s short-term debt, which is used to fund the retailers’ daily operations.

Sears Holdings Corp (NASDAQ:SHLD) said it took a $1 billion five-year term loan in October and it had $1.3 billion revolving credit facilities outstanding as of Febuary 1, 2014 compared with $749 million last year “due to lower commercial-paper borrowings and increased domestic cash balances.” According to the company, it has the ability to borrow an additional $549 million under its revolving facility.

ESL pullback: a warning sign

Matt McGinley, managing director at International Strategy & Investments, a research firm based in New York, opined that ESL Investment and Lampert’s pullback in acquiring the short term debt of Sears Holdings Corp (NASDAQ:SHLD) is warning sign that he might cut its exposure or it is under pressure to fund redemptions from the hedge fund.

McGinley told Bloomberg, “If he has billions of dollars of his own net worth tied up in Sears, and if he’s reducing the exposure, that’s not necessarily a good thing.” He has a Sell rating for the shares of Sears Holdings Corp (NASDAQ:SHLD).

Sears fails to improve liquidity

According to McGinly, Sears Holdings Corp (NASDAQ:SHLD) failed to improve its liquidity. He said, “Their liquidity picture overall has not improved over the course of the past several years, and it hasn’t improved because the core operations of Sears are an absolute disaster.”

He added, “For the investors who still use the investment thesis that Eddie Lampert is a smart guy, well, Eddie Lampert is a smart guy, and guess what, he’s reducing his exposure to Sears.”

Sears Holdings Corp (NASDAQ:SHLD) recorded negative free cash flows over the past four years. During the latest quarter, the company had an $1.44 billion outflow. Based on data compiled by Bloomberg, the company will burn cash in less than nine months if it fails to improve its operations or obtain additional financing.

Lampert serves as chairman and CEO of Sears Holdings Corp (NASDAQ:SHLD). He lea the merger of Sears, Roebuck & Co and Kmart Holding Corp in 2005. Under his leadership, the company experienced sales declines over the past 28 consecutive quarters while implementing strategies to turn around Sears.