Sears will trade its Canadian stock shares for cash

by Yinmeng Liu

Sears Holdings Corp., scrambling to boost its cash position as it prepares for the financially crucial holiday sales season, disclosed a plan to raise up to $380 million by selling off most of the Hoffman Estates company’s stake in a Canadian affiliate.

Sears, which owns 51 percent of Sears Canada Inc., has said previously that it was considering options regarding that holding. Under the plan it unveiled Thursday, the U.S. retailer will provide its stockholders with certain rights that allow them to buy as many as 40 million shares of Sears Canada, at a price of C$10. 60 apiece. The company said it expects to receive at least $168 million of the total in mid-to late-October.

Sears flagship store on State Street, now shuttered. Picture by Jessica DuBois
Sears flagship store on State Street, now shuttered. Picture by Jessica DuBois/MEDILL

Proceeds from the offering “will provide additional liquidity” to Sears Holdings “as it enters into the holiday period and will be used for general corporate purposes,” said Rob Schriesheim, the chief financial officer at Sears, with the remainder coming in November.

In NASDAQ trading Thursday, Sears’ long depressed shares climbed $1.88, or 7.47 percent, to close at $27. 06 today. Sears shares traded above $180 as recently as 2007, but entered into a long spiral downward as the company’s financial and competitive problems grew more apparent.

Just last month, Fitch Ratings, citing the company’s dwindling cash reserves and its huge recent operating losses, lowered its rating on Sears debt to double-C –even deeper into “junk bond” category – from triple-C. $3.79 per diluted share.

“Sears is selling its subsidiary, and taking other actions like spinning off its Lands’ End unit, because the company is desperate for cash,” said retail-industry consultant Howard Davidowitz.

“Sears is in the process of liquidation,” Davidowitz said, “There’s no future for Sears.”

Shriesheim, the CFO, said the retailer might take further actions to enhance its financial flexibility over the next six to 12 months after examining its capital structure.