Sears Holding Corp, 125-year-old American department store company, receives court approval on Tuesday for $350 million in critical debtor-in-possession financing.
As reported in Reuters, the loan will keep the company running through the holiday season while it finds ways to reorganize. Prior to hearing on Sears’ bankruptcy financing arrangements in the U.S. Bankruptcy Court for the Southern District of New York, the retailer reached the finance deal with Cyrus Capital Partners LP, Reuters reported, citing a person familiar with the matter. Cyrus’ loan replaced a similar deal Sears made with a financial firm Great American Capital Partners earlier this month. Cyrus is more likely to offer better terms to Sears, the person said.
A Cyrus spokeswoman declined to comment, while Great American Capital Partners’ president John Ahn said that the terms of transaction were less favorable than what the firm had agreed to.
At the hearing on Tuesday, Robert Drain, U.S. Bankruptcy Judge approved the deal for the $350 million loan. It adds to $300 million loan Sears received from banks when it filed for bankruptcy protection in October this year, giving the company a total loan of $650 million. According to Drain, these loans will benefit everyone.
People familiar with the matter said that Cyrus as well as Hedge Funds have been in talks with Sears over the past few weeks regarding financing to help the company continue operating during its bankruptcy proceedings.
Since 2008 financial crisis, bankruptcy had come into light, following with lengthy slump in sales, losses for seven straight years, and debt load of about $5 billion.
In an attempt to avoid the bankruptcy last year, Sears sold its Craftsman tool brand for $900 million to Stanley Black & Decker. With growing popularity of online shopping, many brick-and-mortar retail chains have faced hard times and bankruptcies. To that end, the Hoffman Estates has also signed a deal with the e-commerce giant Amazon to sell Kenmore appliances.
Sears won approval from bankruptcy court earlier this month to improve plans to stay in the business and find a buyer, even as the beleaguered retailer evaluates offers from liquidators, Reuters reported. Some creditors have suggested that Sears should consider closing down, allowing liquidators to sell its assets similar to what Sports Authority and Toy “R” Us did.
Sears’ Chairman Eddie Lampert, who also runs hedge fund ESL Investments Inc, said the company is planning to shut about 180 stores while it works on potential bid to stay in the business.