Sears takes steps to work its way back to profitability
The parent company of Sears and Kmart, which has been paring costs and hoarding cash in a bid to survive, said Tuesday it will put off repaying much of a $500 million loan to help shrink its debt.
Subsidiaries of Sears Holdings now have a deal that will allow them to pay back $100 million of a $500 million loan in July, the initial date of maturity. But the remaining $400 million will not come due until January 2018, with Sears having the option to push the maturity date out even further to July of next year.
The iconic retailer has been taking numerous steps to restore its bottom line, which has suffered amid management stumbles and a retail landscape full of more nimble retailers and consumers increasingly more interested in shopping online.
After announcing at the start of the year it would shutter 150 underperforming stores, it has recently added at least 30 more locations to the list. The retailer has been selling off chunks of its extensive real estate holdings, borrowing money and even putting some of its cherished brands up for sale.
Now, in addition to its loan extension, the company said Tuesday it had reached a deal with Metropolitan Life Insurance Co. to have the insurer dole out $515 million of pension liability to roughly 51,000 Sears company retirees. “This action is expected to have an immaterial impact on the funded status of our total pension obligations,” Sears said in a statement, “but will serve to reduce the size of the company’s combined pension plan, future cost volatility and plan administrative expenses.”
The moves are all aimed at Sears’ goal of boosting profits and shrinking its outstanding debt and pension obligations by $1.5 billion this year.
In March, the company rattled Wall Street when it said in a filing with the Securities and Exchange Commission that it had “substantial doubt” about its ability to stay in business unless it could borrow more and tap cash from assets. The notification was necessary based on a 3-year-old rule change that requires businesses to be more transparent about potential risks they face within a year of their reported financial statements.