Lampert fund looked to safeguard Sears' vendors

[March 15, 2012]  NEW YORK (AP) -- Sears Holdings Corp. says billionaire investor Edward Lampert's hedge fund tried to ease vendors' concerns nearly two months ago by taking on some of the risk that the vendors would face if Sears filed for bankruptcy.

The move, which came in January, was disclosed in a regulatory filing Wednesday. A representative for Sears could not be immediately reached on Thursday.

In mid-January reports surfaced that lender CIT Group Inc. had stopped financing loans to vendors waiting to be paid by Sears but was quickly followed by reports that CIT was looking at approving financing again. CIT, which is based in New York, makes loans to small and mid-size businesses.

Lampert's ESL Investments Inc. agreed Jan. 26 to buy a stake in receivable put agreements from a financial institution Sears did not identify. These agreements pay vendors if a company seeks bankruptcy protection before paying for shipped goods.

The filing said that ESL, which holds 62 percent of Sears' stock, may choose to buy an 80 percent stake in the rights and obligations from the financial institution's receivable put agreements with Sears vendors.

ESL had a participation interest of $93.3 million in the financial institution's agreements related to Sears as of Jan. 28.

Last month Sears said that it was going to spin off its Hometown and Outlet stores as well as some hardware stores in a deal expected to raise $400 million to $500 million. The Hoffman Estates, Ill., company also said that it made a separate deal to sell 11 stores to the real estate company General Growth Properties for $270 million and planned to cut its inventory by $580 million.

Those plans followed news in December that Sears would close at least 100 to 120 stores to raise cash after a disastrous holiday season in which revenue at stores open at least a year -- an indicator of a retailer's health -- fell 5.2 percent in the eight weeks ended on Dec. 25.

Sears reported in February that it lost $2.4 billion in its fourth quarter and its adjusted earnings results missed Wall Street's expectations. Revenue fell 4 percent to $12.48 billion, but topped analysts' estimates.

Sears shares finished at $79.96 on Wednesday. They have traded as high as $87.12 over the past year and as low as $28.89.

[Associated Press]

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