UPDATE 3- Sears says may sell stores to REIT in latest move to raise cash

Fri Nov 7, 2014 2:29pm EST
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By Nathan Layne and Sruthi Ramakrishnan

Nov 7 (Reuters) - Sears Holdings Corp said Friday it may sell up to 300 stores to a real estate investment trust in a move that would spin off prized assets to shareholders and could accelerate a breakup of the retailer by billionaire Chief Executive Eddie Lampert.

Shares of the retailer rocketed 34 percent to $43.71 as investors cheered the possible influx of cash at a time when the company, hampered by sluggish sales, is losing about $7 million a day.

Sears said it was considering a sale of 200 to 300 of its stores to a newly created real estate investment trust (REIT), which would then lease the properties back to Sears. Shareholders would be offered rights to buy shares in the REIT in proportion to their ownership of Sears stock.

The move is the latest in a series of unusual transactions between the company and CEO Eddie Lampert, who has through his hedge fund in recent months subscribed to two rights offerings and anchored a $400 million loan. Lampert owns 48.5 percent of Sears and is expected to invest that proportion in the REIT.

It also would represent the most significant effort to date to cash out of prime real estate, widely considered the company's crown jewel. Sears has spun off a series of operating units and has struck leasing deals, including one last month with European retailer Primark, but it has left many valuable properties untouched on its balance sheet.

"It's essentially been a slow breakup," said Chad Brand, president of Peridot Capital Management, which owns Sears bonds. "It is obviously being accelerated now."

Sears also said it sold a full-line store in Cupertino, California, for $102.5 million in October.   Continued...