Sears Holdings Announces Steps To Enhance Liquidity, Stabilize Operating Performance

HOFFMAN ESTATES, Ill., Jan. 5, 2017 /PRNewswire/ -- Sears Holdings Corporation (NASDAQ: SHLD) today announced a series of additional strategic actions to increase its financial flexibility and improve long-term operating performance. These actions will facilitate the transformation of Sears from a store-based, asset-intensive business model into a membership-focused, asset-light business model. As such, the Board of Directors has determined to:

• Close an additional 150 non-profitable stores, comprised of 108 Kmart and 42 Sears stores, to stem losses;
• Enter into an agreement to sell the Craftsman business for a cumulative $775 million, together with use of a perpetual license for the Craftsman brand, royalty free for 15 years, and a 15-year royalty stream on all third-party Craftsman sales to new customers;
• Generate up to $1 billion in liquidity through both a newly entered $500 million real estate backed loan, secured by real estate properties valued at over $800 million; and a previously announced standby letter of credit facility of up to $500 million from certain affiliates of ESL Investments, Inc., issued by Citibank, N.A., each subject to the terms thereof;
• Market certain properties within the company's real estate portfolio to further unlock value and increase liquidity.

"We are taking strong, decisive actions today to stabilize the company and improve our financial flexibility in what remains a challenging retail environment," said Edward S. Lampert, Chairman & CEO of Sears Holdings. "We are committed to improving short-term operating performance in order to achieve our long-term transformation."

"Going forward, Sears will be more focused on our Shop Your Way membership platform, a network with tens of millions of active members, and our Integrated Retail strategy in order to be a more nimble, innovative and relevant retailer that is better able to provide value and convenience to our customers. We are confident that concentrating on these key initiatives will lay the foundation for growth over the long-term," Mr. Lampert continued.

STORE CLOSURES

Over the last two weeks we have announced the closing of non-profitable stores, comprising 108 Kmart and 42 Sears stores. The list of store locations impacted can be viewed at http://searsholdings.com/docs/010417_store_closing_list.pdf. While these stores collectively generated about $1.2 billion in sales over the past 12 months, they generated an Adjusted EBITDA loss of approximately $60 million over that same period. We expect to generate a significant amount of cash from the liquidation of the inventory and related assets of these stores. "The decision to close stores is a difficult but necessary step as we take actions to strengthen the Company's operations and fund its transformation. Many of these stores have struggled with their financial performance for years and we have kept them open to maintain local jobs and in the hope that they would turn around. But in order to meet our objective of returning to profitability, we have to make tough decisions and will continue to do so, which will give our better performing stores a chance at success," Mr. Lampert said.

CRAFTSMAN TRANSACTION

The company has entered into an agreement to sell its Craftsman business for $525 million at closing, $250 million in three years, together with use of a perpetual license for the Craftsman brand, royalty free for 15 years, and a 15-year royalty stream on all third-party Craftsman sales to new customers that could yield several hundred million dollars more over time.

"We are pleased to announce our agreement to restructure the ownership of our Craftsman brand, which will allow us to both realize value and participate in the expansion of its distribution and service offerings," Mr. Lampert said.

INCREASED LIQUIDITY

As announced on December 29, 2016, Sears Holdings has obtained a secured standby letter of credit facility from certain affiliates of ESL Investments, Inc., issued by Citibank, N.A., of up to $500 million. In addition, we have entered a $500 million real estate backed loan, secured by real estate properties valued at over $800 million, against which an initial draw of approximately $320 million has been made. These actions will provide additional liquidity and flexibility as we work to close the asset sales previously referenced.

Further, our Board of Directors has established a Special Committee to market certain real estate properties with the goal of raising over $1 billion. We have already identified diverse transaction opportunities to further unlock value and increase liquidity and expect the Special Committee will engage external advisors to help us market these properties over the next several months.  We have executed several different forms of real estate monetization in the past and expect these structures could be among the options evaluated by the Special Committee in connection with this initiative.

Q4 BUSINESS UPDATE

Sales have continued to be challenging during the quarter to date. Same store sales at Sears and Kmart for the first two months of Q4 have declined in the range of 12-13%. We have continued to manage inventory and costs closely and our current quarter to date Adjusted EBITDA performance is largely in line with last year, despite the sales declines.

Our Home Services business continues to improve and we believe it is positioned to be a pillar of growth going forward. We are continuing to explore ways to maximize the value of our Home Services and Sears Auto Centers businesses as well as our Kenmore and Die Hard brands through partnerships or other means of externalization.

Forward-Looking Statements
This press release contains forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements about our transformation through our integrated retail strategy, our plans to redeploy and reconfigure our assets, our liquidity, and our ability to exercise financial flexibility as we meet our obligations. Whenever used, words such as "will," "expect," and other terms of similar meaning are intended to identify such forward-looking statements. Forward-looking statements, including these, are based on the current beliefs and expectations of our management and are subject to significant risks, assumptions and uncertainties, many of which are beyond the Company's control, that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Detailed descriptions of risks, uncertainties and factors relating to Sears Holdings are discussed in our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. While we believe that our forecasts and assumptions are reasonable, we caution that actual results may differ materially. We intend the forward-looking statements to speak only as of the time made and do not undertake to update or revise them as more information becomes available, except as required by law.

About Sears Holdings Corporation
Sears Holdings Corporation (NASDAQ: SHLD) is a leading integrated retailer focused on seamlessly connecting the digital and physical shopping experiences to serve our members – wherever, whenever and however they want to shop. Sears Holdings is home to Shop Your Way^®, a social shopping platform offering members rewards for shopping at Sears and Kmart as well as with other retail partners across categories important to them. The company operates through its subsidiaries, including Sears, Roebuck and Co. and Kmart Corporation, with full-line and specialty retail stores across the United States. For more information, visit www.searsholdings.com.

NEWS MEDIA CONTACT:
Sears Holdings Public Relations
(847) 286-8371

SOURCE Sears Holdings Corporation

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