CEO Lampert buys some of company's debt: sources
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[March 29, 2016]
By Jessica DiNapoli and Kristen Haunss
(Reuters) - Sears Holdings Corp Chief
Executive Eddie Lampert has acquired a portion of the company's new $750
million loan in his latest bet on the parent of Sears department stores
and Kmart discount shops, people familiar with the matter said.
The loan helps Sears pay down some of its older debt at a time when
shoppers are moving away from malls in favor of Internet shopping
and the company, which has lost more than $8 billion over the last
five years, sees its sales plummet.
Lampert, whose net worth is pegged by Forbes at $2.4 billion, is
buying the debt through his hedge fund ESL Investments, the people
said last week. He is picking up a couple of hundred million dollars
of the new term loan arranged by Bank of America Corp <BAC.N>, one
of the people added.
Besides Lampert, buyout firm TPG Capital LP also helped fund the
term loan, according to the people. The loan, backed by Sears'
inventory and receivables, pays an interest rate more than four
times higher than the average for the same type of loan to a retail
company, according to Thomson Reuters LPC data.
The collateral backing the loan is such that Lampert and the other
investors in it would be paid in full in the event of a liquidation,
the people said.
The sources asked not to be identified because details of the loan's
syndications are not public. Lampert declined to comment through a
spokesman last week, and a TPG representative also declined to
comment last week.
Sears said in a statement on Monday that it has sufficient financial
resources and liquid assets to fund its transformation and meet all
of its financial obligations.
The term loan is expected to close on April 8, at which point Sears
will receive the proceeds from it.
The new term loan buys Lampert time to either turn around the
business or continue to sell off its most valuable assets, said
David Tawil, president at hedge fund Maglan Capital.
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"Lampert has successfully spun out other pieces of the overall
conglomerate over time, and that has gone to shareholders, either
through a dividend or spinning out the stock," Tawil said. "That's
still a possibility for some of the assets of the company."
Sears has said it is considering selling its Sears Auto Center
business, and is also looking into other asset sales. Lampert and
his affiliates also own about 50 percent of the outstanding shares
of the company's common stock.
Sears had about $3 billion in borrowings as of Jan. 30. Its shares
have dropped more than 60 percent in the last 12 months. The company
now has a market capitalization of $1.6 billion.
(Reporting by Jessica DiNapoli and Kristen Haunss in New York;
Editing by Bernard Orr and Tom Brown)
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