Lampert’s fund, ESL Investments, offered to provide a $300 million loan to Sears earlier this month to provide the struggling retailer more time to execute its turnaround strategy.
The loan is secured by a lien against Sears’s inventory, receivables and other working capital, the Chicago Tribune reported. The ESL agreement permits Sears to solicit up to $200 million in loans from other investors on the same terms, Sears said.
This is not the first time that ESL has supplied short-term financing to cover Sears’s operational shortfalls. Sears has been mired in red ink amid sliding sales, posting annual losses for the past six fiscal years.
Sears lost $395 million in the fiscal second quarter, compared to a profit of $208 million a year earlier. The year-ago results were bolstered by the company’s $2.7 billion spinoff of properties into a real estate investment trust. Same-store sales declined 5.2% in the period, with Kmart same-store sales down 3.3% and Sears domestic same-store sales off 7%.
Lampert is Sears’ largest shareholder, with nearly half of the company’s stock.
Lampert merged Sears, Roebuck & Co. with Kmart in 2005 after he had helped bring Kmart out of bankruptcy, subsequently renaming the company Sears Holdings. But the retailer has struggled under competitive pressure from nimbler rivals such as Walmart and Home Depot Inc.
Sears has been spinning off assets, selling properties and closing stores to stem the financial losses as it invests in more profitable operations, including its online capabilities, the Shop Your Way rewards program and its popular Kenmore, Craftsman and DieHard consumer brands.