SEARS WARNS IT WILL CONSIDER ‘ALL OTHER OPTIONS’ IF REFINANCING FAILS

Department store chain Sears Holdings Corporation warned Wednesday that it recorded a net loss in the fourth quarter, which included the crucial holiday shopping season, as it continues to close stores across the country.

The retailer also announced it has raised $100 million in new financing and is pursuing an additional $200 million from other counterparties.

In addition, the troubled retailer has amended its existing second lien notes to increase its borrowing base advance rate for inventory and defer its collateral to the second quarter of 2018.

Sears is also in discussions with certain lenders regarding additional transactions to improve the terms on potentially more than $1 billion of its non-first lien loan debt.

However, should the company’s efforts to complete these transactions not be fully successful, the Board said that it “will consider all other options to maximize the value of its assets”.

Sears Holdings will also benefit from cost reduction activities undertaken in the 2017 fiscal year, including additional store closures announced in January 2018, as the company continues to right-size its store footprint in number and size. While the closing stores collectively generated about $850 million in sales over the past 12 months, they were among its lowest performing stores with an average gross margin rate approximately 400 basis points lower than its ongoing stores.

While closing these stores may negatively impact Sears’ sales, its actions are aimed at returning the company to profitability. Furthermore, the retailer expects to generate a significant amount of cash from the liquidation of the inventory and related assets of these stores.

Sears Holdings will continue to strategically evaluate the productivity of its Kmart and Sears stores as the company transforms its business model so that its physical store footprint and its digital capabilities match the needs and preferences of its members. In addition, Sears Holdings will continue to evaluate strategic options to unlock value from its real estate portfolio, as well as its Kenmore and DieHard brands and its Sears Home Services and Sears Auto Centers businesses, as well as continue to seek other potential sources of capital.

“As previously announced, we are actively pursuing transactions to adjust our capital structure in order to generate liquidity and increase our financial flexibility,” said Rob Riecker, the chief financial officer at Sears Holdings. “The new capital we have secured represents meaningful progress towards those objectives and demonstrates that we continue to have options to finance our business.”

“We made significant progress in 2017 through our efforts to reset our cost base and enhance our liquidity, as well as our recently announced agreement with the PBGC to pre-fund our contributions to our pension plan for the next two years,” added Edward S. Lampert, chairman and chief executive officer of Sears Holdings. “The initiatives we have announced today build on those achievements and make clear our determination to remain a viable competitor in the challenging retail environment. The financial transactions we are pursuing and incremental cost actions are designed to accelerate our return to profitability and enable Sears Holdings to increase our investment in the most promising opportunities in our enterprise, including our Shop Your Way network and our Sears Home Services business. Our leadership team is more aligned and committed to the transformation of Sears Holdings than ever before. With the support of our associates, we hope to work constructively with our investors, vendors and other constituents to facilitate the actions we are announcing today.”