Sears Holdings Corp (NASDAQ:SHLD) plans to raise up to $625 million in debt through an offering of 8% senior notes and warrants, as the struggling retailer attempts to shore up its balance sheet ahead of the holiday season. With 48.5% of the retailer’s stock controlled by CEO Edward Lampert, the latest announcement marks the third time in two months that the billionaire has agreed to pump funds into the struggling retailer.
Terms of Sears Holdings’ debt offering
Sears Holdings Corp (NASDAQ:SHLD) said in its filings Monday that it anticipates raising at least $303 million from the hedge fund run by Mr. Lampert in the rights offering, which will give shareholders an opportunity to buy notes that come due in 2019. The notes will carry an interest of 8% and give the shareholders the right to buy Sears stock for $28.41 a share.
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In its blog post Monday, Sears Holdings Corp (NASDAQ:SHLD) said the rights offer would provide it with additional long-term flexibility. The retail chain expects that it will provide confidence to its vendors and other constituents that it will continue to generate the liquidity needed to support its business.
In an effort to shore up its fundraising efforts, the retailer will also raise more money by leasing space in seven stores, including the one at Pennsylvania’s King of Prussia Mall, to European fashion retailer Primark. Though the financial terms weren’t disclosed, the deal envisages Sears giving up some space in top-rated malls and opening a door to a competitor that has been highly successful in Europe by selling fashion at deeply discounted prices.
Thrust to boost liquidity
The retailer has been attempting to enhance liquidity amid concerns among suppliers about its finances going into the holiday season. Its deepening financial troubles have forced insurers and banks to enhance the cost of guaranteeing payment to vendors, rattling the retailers’ supply chain ahead of the key holiday season.
Earlier this month, the beleaguered retailer announced that it is shedding the majority of its stake in its Canadian unit to raise up to $380 million so that it can purchase inventory. The plan involved selling about 40 million Sears Canada Inc. shares, mainly to its own shareholders, including Lampert and ESL Investments Inc.
The retailer also received a $400 million loan last month from ESL Investments, which is owned by Lampert. In a regulatory filing last month, Sears Holdings Corp (NASDAQ:SHLD) disclosed that ESL Investments had already supplied it with a collateralized $200 million and would double that amount before the end of September.
With the spinoff of Sears’ Lands’ End unit to its shareholders earlier this year and the sale of some real estate assets, the retailer has the potential to raise as much as $2 billion if other shareholders fully participate in the Sears Canada and debt offerings.
In other news, a Sears clerk was arrested yesterday for swiping nearly $4 million in items, or perhaps they are related?