Struggling Sears is borrowing another $200 million from its CEO to stay afloat
The company announced Thursday that it obtained a loan called a secured standby letter of credit facility for an initial cash infusion of $200 million, with the option to expand the amount to $300 million.
This particular kind of loan comes with a guarantee on behalf of the lenders that Sears' suppliers will be paid, should the company default on its debt.
The loan is being provided by JPP, LLC and JPP II, LLC, which are affiliates of Lampert's hedge fund, ESL Investments. Citibank is serving as administrative agent and issuing bank.
Sears' shares surged as much as 6% Thursday morning to $8.64, after closing at a 52-week low on Wednesday following Business Insider's report that the company was planning to close more stores.
In a statement on the loan, Sears Chief Financial Officer Jason Hollar said, "As Sears Holdings has consistently shown, we will take actions to adjust our capital structure, generate liquidity and manage our business to enable us to execute on our transformation while meeting all of our financial obligations. This new standby letter of credit facility further demonstrates that Sears Holdings has numerous options to finance our business strategy."
Over the past two years, Lampert and his hedge fund have loaned Sears more than $800 million - not including this most recent cash infusion -to keep the business in operation.
In the most recent quarter, Sears' revenue fell 13% to $5 billion and losses widened to $748 million from $454 million in the period last year.
Same-store sales dropped 7.4%, including a 10% decrease at Sears stores and a 4.4% decrease at Kmart stores.