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Sears Buys Time With Latest Financial Maneuvering

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Sears

The owner of Sears and Kmart has reached separate agreements to extend a portion of its $500 million debt and reduce the size of the company’s pension obligations.

This is the latest move by Sears Holdings Corporation to try to reduce its outstanding debt and pension obligations by $1.5 billion for fiscal 2017. The retailer is working to improve profitability, liquidate assets and manage working capital.

On Monday, certain subsidiaries of the company agreed to repay $100 million of its $500 million 2016 secured loan facility at its original maturity in July 2017, and extend the maturity on the balance until January 2018 or possibly July 2018. The lenders are affiliates of JPP, LLC and JPP II, LLC and Cascade Investment LLC. The terms of the loan facility were approved by the Related Party Transactions Subcommittee of Sears’ board of directors, with advice from Centerview Partners and Weil Gotshal & Manges, the Subcommittee’s outside financial and legal advisors.

Additionally, the Sears has entered an agreement with Metropolitan Life Insurance Company to annuitize $515 million of its pension obligations, under which the insurance company will pay future pension benefit payments to approximately 51.000 retirees. “This action is expected to have an immaterial impact on the funded status of our total pension obligations, but will serve to reduce the size of the Company’s combined pension plan, future cost volatility and plan administrative expenses.”

These developments are the latest ways in which Sears is trying to throw everything it has behind staying one step ahead of creditors. Facing a changing retail landscape, an apathetic consumer base and an outsized debt load, the retailer is closing stores, offloading assets and selling its iconic brands to stay viable.

Many have predicted the stores’ demise much to the dismay of CEO Edward Lampert who—despite evidence to the contrary, including a March SEC filing casting doubt on whether the company could continue as a going concern—insists all is well with the retailer. He reportedly lashed out at the press last week for presenting the company in a negative light. That was followed by a lawsuit and fiery missive on the company blog against a supplier for what he deems to be opportunistic business practices.

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