{"id":7037,"date":"2018-04-24T14:15:11","date_gmt":"2018-04-24T18:15:11","guid":{"rendered":"http:\/\/lifeinsurance-orleans.ca\/Life-Insurance-Blog\/?guid=f58bb95be4d4fdc813f88e7abcdd93f0"},"modified":"2018-04-24T14:15:11","modified_gmt":"2018-04-24T18:15:11","slug":"reality-sets-in-at-eddie-lamperts-sears-with-another-1-billion-due","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2018\/04\/24\/reality-sets-in-at-eddie-lamperts-sears-with-another-1-billion-due\/","title":{"rendered":"Reality sets in at Eddie Lampert\u2019s Sears, with another $1 billion due"},"content":{"rendered":"<p>Few people on Wall Street believe in Eddie Lampert like Eddie Lampert.<\/p>\n<p>Thirteen years after merging Sears, one of America&#8217;s most iconic retailers, with the budget Kmart chain, the hedge-fund billionaire is moving &#8212; again &#8212; to salvage what he can.<\/p>\n<p>His latest plan, announced Monday, would have his ESL Investments Inc. buy Kenmore, Sears&#8217;s well-known appliance brand, as well as several other businesses. In other words, Lampert, also chief executive officer of Sears Holdings Corp., wants to sell what is perhaps Sears&#8217;s last jewel to his own hedge fund &#8212; at least if other bidders don&#8217;t emerge.<\/p>\n<p>The news gave Sears&#8217;s long-suffering stock a bump, but for Lampert and his investors, the respite masks a harsh reality: The department-store chain confronts a wall of debt and pension obligations that would be difficult to surmount even if its business weren&#8217;t as bad as it is &#8212; and business, by all accounts, is very bad indeed.<\/p>\n<ul class=\"related_links\">\n<li><a href=\"http:\/\/business.financialpost.com\/news\/retail-marketing\/sears-retirees-seek-appointment-of-trustee-to-help-recoup-part-of-the-3b-in-dividends-paid-to-shareholders\">Sears retirees seek trustee to help recoup part of $3 billion in dividends paid to shareholders<\/a><\/li>\n<li><a href=\"http:\/\/business.financialpost.com\/news\/retail-marketing\/brief-sears-canada-to-seek-court-approval-for-liquidation\">\u2018Following the Eaton\u2019s death spiral\u2019 Sears to end 65 years of retail history<\/a><\/li>\n<li><a href=\"http:\/\/business.financialpost.com\/pmn\/business-pmn\/sears-reports-2q-loss\">Sears Holdings to close more U.S. stores, including 28 Kmart locations<\/a><\/li>\n<\/ul>\n<p>The numbers tell the story. About US$1 billion of Sears debt will come due within the year, according to the company&#8217;s latest results. It has promised pensions to about 100,000 retirees, but its plan was underfunded by US$1.47 billion as of Feb. 28. Its bonds are trading well below face value, with some selling for less than 50 US cents on the dollar &#8212; a sign many investors doubt Sears will pay its debts in full. In the last eight years, Sears stock has plummeted about 95 per cent.<\/p>\n<h3><strong>Extracting Cash<\/strong><\/h3>\n<p>&#8220;This is a slow-motion liquidation that has gone on for several years, trying to extract cash out of it,&#8221; said Craig Johnson, head of research firm Customer Growth Partners. &#8220;If you keep going, Sears the retailer will end up with more liquidity that maybe buys it a few more quarters. But to what end, if all Sears is going to end up as is four walls, a roof and a parking lot?&#8221;<\/p>\n<p>A spokesman for Sears declined to comment Monday beyond the earlier statement about ESL Investments.<\/p>\n<p>Monday&#8217;s plan was Lampert&#8217;s latest attempt to put off what some analysts warn may be inevitable: a bankruptcy for the 125-year-old company, whose &#8220;Dream Book&#8221; catalog was once a fixture in many U.S. homes.<\/p>\n<p>Lampert has previously called for going to an &#8220;asset-light&#8221; operation. He wants to manage a retailer with fewer stores and a robust online business. That makes sense, given the accepted fact that the U.S. has too much retail space. He&#8217;s put in a plan to cut costs by US$1.25 billion a year and raise cash with some success &#8212; the U.S. tax overhaul helped the ailing retailer post a rare quarterly profit last month.<\/p>\n<p>In addition, Lampert&#8217;s offloaded real estate and other units, including its Lands&#8217; End clothing division and Craftsman tool brand. Sears Canada had suffered similar losses and shrinking revenue to the U.S. business, and the partially spun-off chain filed for protection from creditors in Canadian court last June. And at the end of last quarter, Sears had just US$182 million in cash and equivalents, down from US$286 million a year earlier.<\/p>\n<h3><strong>Creating an &#8216;Illusion&#8217;<\/strong><\/h3>\n<p>Monday&#8217;s announcement that ESL is interested as a buyer is an effort to make Sears&#8217;s remaining assets seem healthy and worthy of a high sales price, said Noel Hebert, an analyst at Bloomberg Intelligence.<\/p>\n<p>&#8220;Sears has been really good at creating the illusion that something is happening that can turn the business around,&#8221; he said.<\/p>\n<p>Some question how realistic that plan is. According to ESL&#8217;s latest SEC filing, the firm had just US$1.3 billion as of Dec. 31, and about US$433 million of that was in AutoNation, Lands&#8217; End and Sears-related stocks. The firm didn&#8217;t indicate what price Kenmore could sell for, or what Lampert&#8217;s other holdings are.<\/p>\n<p>The biggest chunk of Lampert&#8217;s net worth is made up of cash, so he&#8217;s been fairly insulated from Sears&#8217;s performance. Since June 2013 when Bloomberg Billionaires Index began tracking Lampert, his net worth has dropped by 20 per cent to US$3.7 billion from US$4.6 billion. Meanwhile, shares of Sears have plummeted more than 90 per cent in the same period.<\/p>\n<p>In the meantime, the true value of Monday&#8217;s announcement remains unclear. While there is worth in Sears&#8217;s real estate, much of that lies with Seritage, the real-estate investment trust, which did a previous deal with Sears, Customer Growth Partners&#8217;s Johnson said. And a new owner is no guarantee that potential buyers find Kenmore more attractive. They could still wait for its value to decline further, he said.<\/p>\n<p>&#8220;Sears, the retailer, unless things change, looks like it&#8217;s going to be left holding the bag,&#8221; Johnson said. &#8220;This allows it to hold the bag a little bit longer.&#8221;<\/p>\n<p><a href=\"http:\/\/www.bloomberg.com\/\"><em>Bloomberg.com<\/em><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Sears has a wall of debt and pension obligations that would be difficult to surmount even if its business weren&#8217;t as bad as it is &mdash; and business is very bad<\/p>\n","protected":false},"author":578,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/7037"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/578"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=7037"}],"version-history":[{"count":1,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/7037\/revisions"}],"predecessor-version":[{"id":7039,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/7037\/revisions\/7039"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=7037"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=7037"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=7037"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}