In its ongoing attempt to compensate for its sales performance, the company is undertaking another round of cost cutting measures. In 2017, Sears achieved $1.25 billion in savings and this time it’s aiming for $200 million, excluding any savings related to store closures. From the 103 store closures that the company announced this month, it expects to earn cash as the inventory and related assets are liquefied.
As a part of this plan, Sears is continuing to evaluate store productivity as well as strategic options for its brands, including Kenmore and DieHard.
Sears has also secured a $100 million term loan backed by real estate and intellectual property, with the option of raising $200 million more on this collateral.
[Read about Sears’ financial maneuvers: Infographic: Defying Doubts, A Diminished Sears Dodges Bankruptcy Throughout 2017]
“As previously announced, we are actively pursuing transactions to adjust our capital structure in order to generate liquidity and increase our financial flexibility. The new capital we have secured represents meaningful progress towards those objectives and demonstrates that we continue to have options to finance our business,” said CFO Rob Riecker, Sears Holdings.
Chairman and CEO Edward Lampert added that Sears is attempting to “remain a viable competitor in the challenging retail environment.”
The company has also amended its second lien notes, which mature on Oct. 15, 2018, to change the advance rate for inventory to 75 percent from 65 percent. The amendment also defers the collateral coverage test and restarts it with the second quarter of 2018 so that no collateral coverage event can occur until the end of the third quarter of 2018.
Sears affirmed that it is also pursuing a secured credit facility, consisting of a $407 million secured loan first lien tranche and a $200 million lien tranche backed by the 138 properties valued at $985 million which have been released from the ring-fence agreement with the Pension Benefit Guaranty Corporation.