This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Expect Sears to Lose More Financing Than Just CIT (Update 1)

Stocks in this article: SHLD

Updated from 9:30 a.m. EST

NEW YORK ( TheStreet) -- Sears (SHLD) is losing some financing from CIT Group (CIT), which could ultimately set off a chain reaction among other backers.

CIT will no longer finance some loans to Sears' suppliers who are waiting to be paid by the department store.

While Sears has been making payments on time, CIT hasn't received some financial projections it requested from the department store operator, said Jack Hendler, president of Net Worth Solutions, a merger and acquisition advisory firm.

Other factors -- those who provide loans or lines of credit to suppliers and apparel makers to tide them over until retailers make payments -- are still approving orders, he said, but are also awaiting similar information and have been cautious. "CIT decided not to wait and get their attention," Hendler said.

Several big names in the factor community had expressed concern in December over the state of Sears, saying vendors are already starting to pull back and could distance themselves further from the company if things don't change soon.

One such financier, who wished to remain anonymous, said most were waiting until fourth-quarter numbers are released to assess the situation.

"All of the factors are looking at pulling back," said another factor. "We are all watching it closely and concerned about it. It isn't dire right now, but it ultimately means they will have to file, but that's still a while to go."

"The concern is if Sears keeps reporting losses what will happen by the end of the year when debt starts coming due in 2013," Hendler said. "But Sears has enough assets at least to give the financial community comfort."

But Sears said it isn't too concerned about CIT's recent actions.

"It's important to note, that Sears Holdings has more than adequate liquidity and ample resources at our disposal which give us significant financial flexibility and equally important is to separate disappointing operating performance with liquidity," Sears spokesperson Chris Brathwaite said.

At the end of December, Sears had about $4.2 billion of liquidity and paid all borrowings on domestic revolving credit facility, ending the month with minimal borrowings of $90 million and $621 million of letters of credit outstanding. This resulted in availability of over $2.5 billion on domestic credit facility and $800 million on Sears Canada facility for total $3.3 billion in total available credit.

Braithwaite said Sears does expect to increase borrowings on its domestic revolving credit facility during January.

"In sum, we disagree with their action, in fact we'd point out that other factors are approving shipments to Sears Holdings and CIT's payables represented less than 5% of inventories," Braithwaite said.

Sears announced last month several cost-cutting initiatives, including closing between 100 and 120 Sears and Kmart stores. It also named Ron Boire as chief merchandising officer.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,380.41 +263.17 1.63%
S&P 500 1,886.76 +24.00 1.29%
NASDAQ 4,258.4380 +41.0480 0.97%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs