According to Fitch, which gave Sears Holdings a CC rating recently, stated the company had a high probability of default, the classic retailer may be on its last legs and isn’t likely to be around in 2016. However, Sears CEO Eddie Lampert is having none of this, and is rescuing the operation with a $400 million loan from his hedge fund ESL Investments.
The loan will use real estate as collateral and will be mature by the end of the year, although it can be extended until February 28th if there is no default before then. The loan is guaranteed by a first priority lein on 25 Sears-owned properties.
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Sears has been troubled for several years, and is losing out to competitors. Ecommerce has been a challenge to the entire industry, and while others have kept up with trends, Sears has lagged behind. In addition, the company is seeing increasing losses, declines in revenue and cash burn. Sears might emerge from the abyss, but it might take more than a short-term loan to sort out its problems.