FREE MEMBERSHIP Includes » ABL Advisor eNews + iData Blasts | JOIN NOW ABLAdvisor Gray ABLAdvisor Blue
Skip Navigation LinksHome / News / Read News


Sears to Close 63 More Stores Amid Rising Debt Obligations

June 04, 2018, 08:12 AM
Filed Under: Retail
Related: Sears Holdings

Sears Holdings announced that is it closing 63 stores amid rising debt, a portion of which was used to support its pension fund. 

The company is closing 15 Kmart stores and 48 Sears stores, it said, identifying the stores in a press release issued on May 31. They are among approximately 100 underperforming stores Sears has identified for closure as it focuses its efforts on its best retail outlets. The retailer's same-store sales fell almost 12% during the quarter, compared to an expected drop of 9.3%.

"We continue to evaluate our network of stores, which are a critical component in our transformation, and will make further adjustments as needed and as warranted,." the company said in comments accompanying its first quarter earnings report.

During the quarter Sears completed a refinancing agreement, exchanging nearly $500 million of its debt that had been due this year or next year for debt that will not be due as soon. The move led both Fitch and S&P to downgrade the company's debt rating to default status.

"We believe the transaction constitutes a distressed exchange," said S&P's downgrade note.

On March 14, 2018, Sears closed on new Secured Loan and Mezzanine Loan facilities, pursuant to which the Company received aggregate gross proceeds of $440 million and will contribute $407 million of the proceeds into the Sears pension plans. This relieves the Company of contributions to its pension plans for approximately two years (other than a $20 million supplemental payment due in the second quarter of 2018), further reducing its pension liability.

The company's total cash balances were $466 million at May 5, 2018, including restricted cash of $280 million, compared to $336 million at February 3, 2018, which included restricted cash of $154 million. Short-term borrowings totaled $1.7 billion at May 5, 2018, consisting of $901 million of revolver borrowings, $570 million of line of credit loans, $140 million of borrowings under the incremental real estate loan and $93 million of borrowings under the new secured loan.

Total long-term debt (including current portion of long-term debt and capital lease obligations) was $3.5 billion and $3.2 billion at May 5, 2018 and February 3, 2018, respectively.

At May 5, 2018, the company had utilized approximately $994 million of its $1.5 billion revolving credit facility due in 2020, consisting of $901 million of borrowings and $93 million of letters of credit outstanding. The amount available to borrow under our credit facility was approximately $20 million, which reflects the effect of a springing fixed charge coverage ratio covenant and the borrowing base limitation in the company's revolving credit facility, which varies based on our overall inventory and receivables balances. 

Rob Riecker, Chief Financial Officer of Holdings, said, "To support our transformation efforts, we continue to take important, proactive steps to address our capital structure, enhance our liquidity position and provide the Company with additional financial flexibility. We intend to take further action with respect to certain near-term maturities of our debt, including through repayments, refinancings and extensions of such debt."

During the first quarter of 2018, the Company repaid $300 million of its Term Loan due in 2019 and completed private exchange offers and negotiated exchanges of and amendments to certain of its non-first lien debt.  As a result of the transactions relating to the non-first lien debt, the maturity of approximately $170 million of the Company's 6 5/8% Senior Secured Notes was extended to October 2019.

Week's News

Comments From Our Members

You must be an ABL Advisor member to post comments. Login or Join Now.