Sears reaches deals with Bill Gates, MetLife – Consumer News

on May24

23 May 2017 | 2:00 pm

(Bloomberg)—Sears Holdings plans to extend parts of its $4.2 billion debt load, giving the struggling retailer some breathing room in efforts to make a comeback.

The company will have another six months to repay $400 million of its $500 million secured loan facility, which was originally due in July, with the option to extend it further to July 2018, Hoffman Estates-based Sears said today. CEO Eddie Lampert, who has thrown the company many lifelines before, is one of the lenders of the facility with JPP, along with Bill Gates’s Cascade Investment.

Sears also said it will pass off $515 million in pension obligations to MetLife, making the largest U.S. life insurer responsible for payments to about 51,000 retirees. Sears expects the deal to have an “immaterial impact” on the funded status of its total pension obligations, while reducing volatility and expenses, helping the company reach its target to cut debt and pension obligations by $1.5 billion this fiscal year.

Sears shares were up 4.1 percent this morning.

Sears didn’t immediately respond to requests for comment. MetLife didn’t immediately return a message seeking comment.

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Once the country’s largest retailer, Sears has fallen into a debt spiral, racking up more than $8 billion in red ink over the past five years amid a broader department-store slump. Sears’s 6.875 percent notes that mature in October were little changed at around 93 cents on the dollar in early trading today.

“It still leaves them pretty substantially underfunded on the pension,” said Bloomberg Intelligence credit analyst Noel Hebert, since Sears would be moving both the assets as well as the liabilities affiliated with the obligations to retirees. “But where it ‘helps’ is that they don’t have to worry about their assets keeping up with the growth on the liability side.”

MetLife and Prudential Financial are among companies expanding bets in the pension risk transfer market, as Prudential did with Sears’ competitor and fellow ailing retailer J.C. Penney. The deals add assets under management and are a natural hedge against insurers’ traditional death-benefit businesses. That’s because longer life expectancy makes insurance policies more profitable even while increasing costs for pensions.



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