Sears Chairman and Chief Executive Eddie Lampert has agreed to give the struggling retailer a $400 million short-term loan, with proceeds expected to be used for general corporate purposes.
The retailer entered into the loan agreement with affiliates of ESL Investments Inc., which Lampert founded in 1988 and is the sole stockholder. The first $200 million of the loan was funded at the closing on Sept. 15, with the rest expected to be funded on Sept. 30. The loans mature at the end of 2014, but as long as there is no event of default, the maturity date can be extended to the end of February 2015.
The loan to Sears (SHLD) comes as Lampert has sought to shed assets and spin off businesses as he tries to turn around the weak performance of the company’s mass-market retail stores. Earlier this year, Sears completed the spin off of Lands End (LE), and the company is still weighing a potential separation of its auto center business and strategic alternatives for its stake in Sears Canada. The company has also closed hundreds of stores since 2010.
Last month, Sears reported a sharply wider fiscal second-quarter loss as sales and gross margins tumbled, results Lampert called “unacceptable.” Long-term debt stood at $2.9 billion at the end of the quarter, though Sears said it cut its domestic short-term debt by 41% from the year-ago period and also increased cash on hand.
