Sears Holdings Corp. (SHLD) shares extended declines Tuesday, taking the stock to another all-time low, as the struggling retailer added restructuring expert Alan Carr to its executive board just days ahead of a looming debt repayment that is nearly twice the company's market value.
Carr, who also heads Drivetrain LLC, a restructuring consultancy, will remain on the Board until Sears' 2019 shareholders meeting, the company said Tuesday in an SEC filing, with CEO Eddie Lampert extolling his "deep experience as a director for companies that went through complex organizational change." The move comes less than a week ahead of an Oct. 15 payment deadline for $88.5 million in outstanding Sears bonds -- alongside $44.5 million in company loans -- that could test the group's balance sheet as it struggles to survive long enough to tap into the consumer spending boom expected in this year's holiday shopping season.
Sears shares were marked 2.8% lower in the opening hour of training in New York Tuesday and changing hands at a record low of 60.5 cents each, a move that values the Hoffman Estates, Ill.-based retailer at just $67.8 million.
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Last month, Lampert's ESL Investments Inc. filed a restructuring plan with the SEC that included the sale of its encumbered real estate portfolio and debt swaps with second-lien and unsecured creditors, a move it said would reduce the department store chain's current $5.6 billion in debt to about $1.2 billion, cut annual interest expense by $33 million to $88 million and extend debt maturities.
However, Lampert, who serves as both group chairman and CEO, is also its controlling shareholder and perhaps Sears' most important creditors. In fact, an analysis of Sears' debt by TheStreet's sister publication, The Deal, found that at least $1.6 billion of Sears Holdings loans are held by affiliates of Lampert's ESL Investments.
"Conceivably, Sears could enter bankruptcy, shed some of its debt, strike deals with other lenders and Lampert could wind up with ownership of whatever's left, including a significant amount of potentially valuable real estate," TheDeal's Stephanie Gleason argued.
That might not be much consolation for a company that has shed more than $11 billion over the past six years, shuttered hundreds of stores, fired thousands of employees and watched its stock fall from a record $133 a share in the days leading up to the global financial crisis to its penny stock valuation of today.
"We will now be working aggressively to execute liability management transactions so that we can extend our runway and continue executing on our transformation strategy," Sears told employees last month. "At the same time, we'll continue to move forward with our other planned liquidity and cost measures."