Hoffman Estates, Ill. — Sears is looking to raise up to $625 million through a rights offering, and will sublet space in seven Northeast stores to raise cash and lower costs.
The moves follow last month’s credit downgrade by Fitch Ratings, which said the retailer needs up $700 million in liquidity to get through the upcoming holiday season and could run out of cash after 2016.
Sears chairman/CEO Edward Lampert loaned the company $400 million last month through his privately held hedge fund, ESL Investments, and now seeks to raise the additional funds through an offering of 8 percent senior unsecured notes and warrants to purchase shares of its common stock.
Analysts believe the added liquidity is intended to allay concerns of nervous vendors.
On the real estate front, Sears said it will sublet a total of 400,000 net square feet of retail space to European apparel chain Primark over the next 12 to 18 months. In turn, it will reduce the size of six Sears stores and will vacate a seventh.
The first Primark store will open in Sears’ King of Prussia, Pa., mall store, where the company already sublets space to Dick’s Sporting Goods. A second location is slated to open at New York’s Staten Island Mall in 2016.
Sears real estate president Jeff Stollenwerck said the lease agreements illustrate how the company is rationalizing selling space and “strategically transforming one of the largest retail real estate portfolios in the United States over time.”
The move follows Lampert’s strategy of monetizing Sears’ assets and focusing on the e-commerce channel, arguably at the detriment of its brick-and-mortal stores, analysts have observed.