(NEW YORK) Hedge-fund manager Edward Lampert continues to pump money into Sears Holdings Corp., but for its latest financing the retailer also has tapped another billionaire’s fortune.
The company on Friday said it raised $500 million in financing backed by mortgages on 13 properties. The backers include affiliates of Mr. Lampert’s hedge fund, ESL Investments Inc., and Cascade Investment LLC, the investment firm that manages most of Microsoft Corp. co-founder Bill Gates’s wealth.
A spokesman for Mr. Lampert declined to comment, as did a Cascade spokesman.
Sears, which is mired in a sales slump, has been pursuing fresh financing after ending January with $238 million in cash and cash equivalents. The retailer said last month it had priced a $750 million loan, which was expected to close Friday. Mr. Lampert’s fund acquired a portion of that loan, according to Reuters.
The financial support underscores the deep and unusual relationship between Sears and Mr. Lampert, who took over the company in 2005 and merged it with Kmart. He is chairman and chief executive of the company and his fund controls nearly 55% of the shares outstanding.
The company has posted five straight years of losses amid sliding sales. The company lost $1.13 billion in the fiscal year ended Jan. 30, following on a $1.68 billion loss a year earlier. Sales in the latest year fell 19% to $25 billion.
Sears shares rose 0.8% to $14.45 on Friday, but the stock is down 66% over the past 12 months.
The company, which is based in Hoffman Estates, Ill., is also trying to raise an additional $300 million through asset sales or other means. Taken together, the funds would provide Sears with $1.5 billion in liquidity.
Monica Aggarwal, a Fitch Ratings analyst, estimates that after the loans raised Friday, Sears would still need an additional $1 billion to $1.25 billion to fund operations this year.
A Sears spokesman said the company has sufficient financial resources. He noted that at the end of the fourth quarter, the company had $4.2 billion in liquidity and assets that could be converted into cash, including available borrowing capacity and inventory. He said the company has a wide range of financing options available under its credit facility.
Mr. Lampert has long been a Sears lender. In the past he has bought its commercial paper, but those loans were unsecured. Then in September 2014, he provided $400 million in short-term financing backed by 25 Sears properties. The loan was initially due in just over three months, but was extended and paid off in June 2015.
He has also helped prop up the company by buying shares in entities it has spun off, including a portfolio of real estate that in addition with other transactions raised $2.7 billion last year. Those stores are now owned by Seritage Growth Properties.
Sears has immediate access to $250 million of the $500 million loan announced Friday, which matures in July 2017. If it draws down additional amounts, the company will have to provide eight additional properties as further collateral.
Sears hired Eastdil Secured to syndicate the loan. The ESL affiliates and Cascade each kicked in $125 million, and have committed to providing any portion of the loan that isn’t syndicated to other lenders.
ESL and Cascade have invested alongside each other before, namely in AutoNation Inc., where ESL has maintained a large stake for years.