ESL Offers Sears Vendors Added Protection

HOFFMAN ESTATES, Ill.-ESL Investments, the hedge fund operated by Sears Holdings Chairman Edward S. Lampert, which is the retail holding company's top shareholder, has moved to ensure that vendors would continue to provide merchandise to Sears and Kmart stores in the event of a bankruptcy filing.

According to Sears Holdings' 10-K filing last week, ESL has entered into an agreement with an unnamed financial institution in which the financial institution would purchase vendors' accounts receivables from the sale of goods or services to Sears Holdings, in the event that Sears Holdings files for bankruptcy. This agreement covers vendors that had entered into trade-receivable put agreements (which help safeguard vendors' receivables in the event of a bankruptcy) with Sears Holdings, the filing said. In addition, ESL may choose to purchase an 80 percent interest in the rights and obligations arising under future trade-receivable put agreements the financial institution enters into with Sears Holdings' vendors.

According to a Sears Holdings spokeswoman, the company views this agreement as a vote of confidence by ESL and Lampert, who owned 62 percent of Sears Holdings' outstanding shares and $350 million of its outstanding debt at the end of 2011. "Obviously, we do not speak for ESL, but we see this as a sign of ESL's continued confidence in our company," the spokeswoman told HFN.

The filing also said that, in addition to the 100 to 120 Sears and Kmart stores the company plans to close this year, the company will also close 43 Sears Hometown stores, 10 Sears Hardware stores and nine The Great Indoors stores. Sears Holdings had announced that it would exit The Great Indoors format three weeks ago.

HFN Staff | News & Commentary

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