Sears Holding, the parent of Sears and Kmart, warned Tuesday that it faces “substantial doubt” about its ability to stay in business unless it can borrow more and tap cash from more of its assets, according to its annual 10K filing.
Sears has been selling assets, most recently its Craftsman tool brand. But it says its pension agreements may prevent the spin-off of more businesses, potentially leading to a shortfall in funding.
“Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern,” Sears Holdings said in a filing with the Securities and Exchange Commission.
The company said an inability to generate additional liquidity might limit its access to new merchandise or its ability to procure services. Continued operating losses also could restrict access to new funds under its domestic credit agreement, according to the filing.
In January, Sears said it planned to close 150 stores. In the following month, the retailer initiated a restructuring program aimed at cutting $1 billion in costs annually and reducing debt by $1.5 billion helped by proceeds from the sale of one of its most valuable brands, Craftsman tools to Stanley Black & Decker.
The filing indicates that additional asset sales could be thwarted by an agreement with the Pension Benefit Guarantee Corp as pat of the Craftsman sale. The agreement put a claim on some Sears’ assets in an effort to protect pensions of retired employees.
Already, the pension board agreement requires Sears to make a $250 million cash payment to its pension plan by March 2020, and the pension board has a 15-year lien on revenue owed to Sears from future sales of Craftsman products.
The company has not turned annual profit since 2011.
