HOFFMAN ESTATES, Ill. – Sears is looking to raise more cash, announcing that it is planning a rights offering that may raise up to $625 million.
The company, which runs Kmart and its namesake stores, also said Monday that it struck a leasing deal with European fashion retailer Primark.
Its shares rose more than 22 per cent in afternoon trading.
Sears has been cutting costs, reducing inventory and selling assets to return to profitability. Its biggest albatross remains its stores, which critics say are outdated and shabby.
Chairman and CEO Edward Lampert combined Sears and Kmart in 2005 about two years after he helped bring Kmart out from under bankruptcy protection. The company has since faced mounting pressure from nimbler rivals like Wal-Mart Stores and Home Depot.
Sears is also facing broader structural issues. Like other stores catering to the low- to middle-income customers, Sears is grappling with a slowly recovering economy that’s not benefiting all Americans equally. It’s also trying to catch up to customers who are steering clear of stores and shopping online.
Sears Holdings Corp. said the rights offering will allow its stockholders to buy up to $625 million senior unsecured notes due 2019 and warrants to buy shares of its common stock. It anticipates up to $625 million in proceeds if the offering is fully subscribed and closes as planned.
The proceeds will be used for general corporate purposes.
Sears’ lease agreements with Primark are for seven stand-alone stores in malls. Sears will still have a significant presence at six of the locations. Primark will lease about 400,000 net square feet of retail space in the Northeastern U.S. and is expected to receive the space over the next 12 to 18 months.
Earlier this month Sears said it would sell most of its stake in its Canadian unit to raise as much as $380 million. The Hoffman Estates, Illinois, company also has a $500 million dividend tied to the spinoff of Lands’ End, $165 million in proceeds from some real estate transactions and a $400 million short-term loan, which is helping to bolster its fiscal 2014 liquidity.
Shares of Sears climbed $6.44, or 22.7 per cent, to $34.85 in afternoon trading. Its shares have fallen 41 per cent since the beginning of the year through Friday’s close.