Sears to boost liquidity ahead of holiday shopping season

As part of its agenda to boost liquidity ahead of the highly contested holiday shopping season, Sears Holdings plans to sell most of its 51% stake in its struggling Sears Canada division to shareholders — a move that stands to raise as much as $380 million by November.



Sears — which will retain about 12 million shares — will sell up to 40 million shares of Sears Canada stock, with each shareholder receiving the right to purchase one share for every share they hold. According to the company, at least one unidentified major shareholder plans to will participate.



"Proceeds from the rights offering will provide additional liquidity to Holdings as it enters into the holiday period and will be used for general corporate purposes,” said CEO Ron Schrieshiem. “Together with the $500 million dividend Holdings received in connection with the Lands' End spinoff, the $165 million in proceeds from certain real estate transactions and the $400 million short-term loan the company recently completed, Holdings will have generated up to $1.4 billion in liquidity in fiscal 2014, further demonstrating the company's financial flexibility and providing it the means to fund its transformation and meet all of its obligations. As previously announced, over the next six to 12 months, Holdings intends to evaluate its capital structure with a goal of achieving more long-term financial flexibility, and may take other actions as appropriate."



Last month, the retailer secured a separate $400 million short-term loan from CEO Edward Lampert and his hedge firm, ESL Partners. Sears has also raised $500 million from spinning off its Lands’ End division, and $165 million in real estate transactions.



Sears Holdings said it will continue to work with Sears Canada's board and management to maximize long term shareholder value and to support Sears Canada's strategy after the sale is complete. In September, global ratings agency Fitch Ratings projected that Sears will need $4 billion in capital to avoid running out of cash altogether in 2016. Sears recorded a loss of nearly $1 billion in the six months through Aug. 2. Revenue fell more than 8%.