Sears to sell most of Sears Canada stake as it looks to boost liquidity

Hoffman Estates, Ill. – Sears Holdings Corp. is selling most of its 51% stake in its Sears Canada division to shareholders as its looks to boost its liquidity before the crucial holiday selling season. Sears, which previously said it was exploring options for the struggling Sears Canada unit and retained Bank of America Merrill Lynch in May 2014, expects to raise as much as $380 million by November 2014.



The pressure has been for Sears to secure financing ahead of the holiday season. In September, 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 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. The company said at least one unidentified major shareholder has indicated they will participate. Sears will retain about 12 million Sears Canada shares.



Ron Schrieshiem, CFO of Sears Holdings, said the sale will provide Sears with valuable liquidity for the 2014 holiday season and proves the troubled retailer is still fiscally sound. The ailing retailer also said Thursday that it may take other actions to support its capital structure, if necessary.



"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 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."



Sears Holdings 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%.