Cyrus becomes Sears bankruptcy lender

Cyrus Capital Partners will provide Sears Holdings Corp. with a loan that will keep the bankrupt retailer’s stores open after the hedge fund won a bidding war in a courthouse hallway, according to a lawyer for Sears.

Sears had previously struck a deal for a $350 million loan from specialty financing firm Great American Capital Partners that would have cost 11.5 percentage points over a benchmark lending rate, according to a previous court filing. But after some last-minute wrangling outside a courtroom in White Plains, N.Y., the company emerged with a new loan from Cyrus that will cut the company’s borrowing costs by 1.5 percentage points, company lawyer Sunny Singh said at a hearing Tuesday.

Judge Robert Drain said he’ll approve the so-called junior debtor-in-possession financing, which ranks below earlier funding that the retailer lined up for its Chapter 11 proceedings.

“We had bidding for the junior DIP literally outside in the hallway for the last hour,” Singh told the judge.

The new debt further ties Cyrus, already a major Sears creditor, to the fate of the Hoffman Estates, Ill.based retailer. Cyrus also won an auction for $251 million of internal Sears debt that gives the retailer an infusion of cash while also helping the hedge fund protect the value of derivatives wagers it made on Sears, a person with knowledge of that matter said earlier on Tuesday.