An iconic brand that seems like it is on its last legs is going to get a cash infusion by its CEO Eddie Lampert to raise liquidity ahead of the holiday season, as reported by CFO. Lampert’s hedge fund ESL Investments has a 48% stake in Sears, and is going to pump $303 million into the company with a goal to raise $625 million through an offering of senior notes and warrants.
Sears management stated in a blog post, “This rights offering provides Sears Holdings with an additional long-term flexibility, and we expect it will provide confidence to our vendors and other constituents that we will continue to generate liquidity needed to support our business.”
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Given Sears’ financial problems, banks and insurers have raised the cost of guaranteeing payment to vendors, which interferes with Sears’ liquidity during the holiday season. Its long-term debt and capitalized lease obligations were at $2.2 billion and its cash and cash equivalents amounted to $829 million.
The notes will carry an interest rate of 8% and will allow shareholders to purchase shares at $28.41. Some consider this rate very high for a company that already has significant debt. Sears had already announced it was selling 40 million Sears Canada shares for a total of $380 million.