Sears pulls off its sale-leaseback deal

Using 235 stores of its Kmart and Sears as a massive piggy bank, Sears Holdings Corp. completed its sale-leaseback transaction that it says boosts the retailer’s financial flexibility.

With $2.7 billion in proceeds, the company said it intends to “accelerate investments in its transformation to an asset light, member-centric integrated retailer.”

The deal hinged on the creation of an entity called Seritage Growth Properties, a recently formed, independent publicly traded real estate investment trust.

Sears closed its right offering and sale-leaseback transaction with Seritage Growth Properties this week. In the transaction, Sears sold 235 Sears- and Kmart-branded stores to Seritage along with Sears' 50% interests in joint ventures with each of Simon Property Group, General Growth Properties, and The Macerich Company, which together hold an additional 31 Sears Holdings properties. Sears Holdings received aggregate gross proceeds from the transaction of $2.7 billion.

"We expect the creation of Seritage to enable us to accelerate many of the activities that we have been pursuing over the past several years to transform Sears Holdings into a leading integrated retail membership-focused company," said Edward S. Lampert, Sears Holdings' chairman and CEO. "By separating a portion of Sears Holdings' real estate portfolio into a new, publicly traded company and leasing back the space, we are substantially enhancing Sears Holdings' financial flexibility and significantly transforming our capital structure toward one that is more flexible, long-term-oriented and less dependent on inventory and receivables. We expect to continue to operate most of our retail stores in each of the locations owned by Seritage and lease back the properties, just as we do at a large number of our locations."

Seritage began trading on the New York Stock Exchange under the symbol "SRG" on July 6, 2015.  Sears Holdings will continue to be listed on the Nasdaq Global Select Market under the symbol "SHLD."

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