According to a recent SEC filing Fairholme Fund (MTUF:FAIRX), one of its affiliates is likely to invest up to $100 million in a short-term loan for Sears Holdings Corp (NASDAQ:SHLD). Bruce Berkowitz is the fund manager of Fairholm Fund and owns 25.532.673 shares of Sears Holdings. (You can see complete list of Bruce Berkowitz’s Fairholme Fund holdings here).
The SEC filing mentioned, “The St. Joe Company may invest up to $100 million in participations relating to the Short Term Loan.” St. Joe Company will participate in the $400 million secured short-term loan and is in discussion with Sears Holdings Corp (NASDAQ:SHLD).
Earlier, Sears Holdings Corp (NASDAQ:SHLD) got a $400 million cash infusion from ESL Investments, owned by Eddie Lampart (CEO of Sears Holdings Corp (NASDAQ:SHLD)). However, the loan is unlike earlier cash injections considering that it is secured by 25 real estate properties owned by Sears and the loan will have an annual base rate of 5%. ESL already gave the first installment of $200 million on September 15 and the rest will be paid on September 30.This loan will be due for payment on December 31.
In addition to the news of tax infusion, Credit Suisse analyst, Gary Balter, gave a negative rating to the company saying “This is the End” and added that the company is sitting at the edge of minimal liquidity resources. Balter added, “Let’s face facts. Sears is generating negative operating cash flow of between $1 billion and $2 billion [closer to upper end, it looks like] in 2014. Unless it sells off real assets while somehow maintaining the cash flow from those assets, this story is not likely to have a happy ending, and that ending continues to depend on suppliers.”
Sears Holdings Corp (NASDAQ:SHLD) has a weak financial position considering its $573 million loss, as reported in the second quarter 2014 financial results.
This article has been written by Prakash Pandey and edited by Serkan Unal.