Lampert lends $400 Million to Sears (NASDAQ:SHOS) – the loan caused a dip in stock value for the retailer

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By Thomas Copeland on September 17, 2014 Company

ESL Investments is a privately owned, Greenwich, Connecticut based firm. Estimate of which is worth $9 billion since 2004. The founder is Edward Lampert, who named the company after his initials; the company is run and funds are managed by him. ESL invests into the American public equity and the hedging market. Eddie Lampert, a known billionaire, is also the CEO of Sears (NASDAQ:SHOS). Recently, he lent Sears (NASDAQ:SHOS) a large total of $400 million dollars for the Christmas season.

Sears (NASDAQ:SHOS), is a well known American multinational department store chain. The company was founded back in 1893 and since then has hiked up and in 2012 was ranked as the fourth largest department store for retail sales – and 12th largest retailer in the United States; with revenue of $21.649 billion in same year – 2012. Sears (NASDAQ:SHOS) aims at combining the digital and physical shopping experience to cater to its members. Sears (NASDAQ:SHOS) is part of the “Shop Your Way” campaign, which gives a shopping experience that allows members to earn points and receive profits across a wide range of physical and digital forms.

Sears (NASDAQ:SHOS) is known for dealing in products like, clothing, footwear, bedding, furniture, jewelry, beauty products, appliances, house ware, tools, electronics as well as office and school supplies.

Once this loan became public, Sears (NASDAQ:SHOS) share fell by 7 percent in trading on Tuesday and landed at a value of $31.12. The nature of the loan is short term and 25 of Sears’ properties will acquire it; the interest rate is of 5%, along with a fee of $7 million to be paid up front. The first $200 million was handed to the retailer on September 15th and the remaining is to be given by September 30th.

The given scenario has not played very well with investors; they took this loan as a sign that Sears (NASDAQ:SHOS) is in hot waters. Lampert has been CEO for Sears (NASDAQ:SHOS) for about two years now; since the start his ambition has been to rejuvenate Sears (NASDAQ:SHOS). This loan is not the first effort he Lampert has made, he has always been active in terms of taking initiatives to help the struggling Sears (NASDAQ:SHOS). Lampert even went on to combine Sears (NASDAQ:SHOS) and Kmart, back in 2005. But even that didn’t do much to help because in December last year, ESL had to cut its stakes in Sears (NASDAQ:SHOS) to meet the demands of ESL’s investors.

Sears (NASDAQ:SHOS) and ESL, on the other hand have shared a close bond; the latter holds the position of Sear’s biggest shareholder.

This year hasn’t been very productive for Sears (NASDAQ:SHOS), as their shares have fallen by 20% and the company suffered a loss of about $975 million in the current fiscal year. A recent statement by Sears (NASDAQ:SHOS) states that the loan is being used for corporate purposes, but refrained from providing any further details. Sears (NASDAQ:SHOS) has focused its energy on sales and spinoffs as a safe way of raising revenues.