Sears Holdings has $3.5 billion in long-term debt on its balance sheet and is expected to report a $1.5 billion loss in operating cash flow this year on top of last year’s $2.2 billion deficit, according to Moody’s Investor Service. Sears also owes a minimum $596 million in pension contributions for 2016 and 2017 combined, and has a total unfunded pension and post-retirement obligation of $2.1 billion, according to Moody’s.
The ratings agency last month downgraded Sears’ speculative-grade liquidity rating to SGL-3 from SGL-2. “The SGL-3 rating reflects our view that Sears will continue to rely on external financing and the monetization of its alternative assets to fund its operating losses,” Christina Boni, a Moody’s vice president, said in a statement. “We recognize the risks associated with relying on these sources and continued shareholder support to finance its negative operating cash flow.”
Among the latest financial maneuvers was the $2.7 billion sale in July of 235 Sears and Kmart stores to Seritage Growth Properties, a real estate investment trust spun off from the retailer by Eddie Lampert, Sears’ chief executive officer and its largest shareholder.
Lampert in recent months has funneled cash from his hedge fund, ESL Investments, to bolster Sears as it shifts into a member-centric model focused on loyalty shoppers, best stores and top categories, and explores a possible sale of its venerable Kenmore, Craftsman and DieHard brands.