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Sears to raise cash through Canadian ops sale

By WTOP Staff

ANNE D’INNOCENZIO
AP Business Writers

HOFFMAN ESTATES, Ill. (AP) — Sears, sorely in need of cash, is selling most of its stake in its Canadian unit to raise as much as $380 million.

The rights offering to shareholders for the majority of its 51 percent stake in Sears Canada Inc. will give the retailer some breathing room as it heads into the crucial holiday season.

The announcement Thursday is the last in a string of initiatives the company is undertaking to shore up finances. Sears said that it will evaluate its capital structure over the next six to 12 months and may take further action to create more financial flexibility.

The offering comes after Sears failed to find a buyer for the Canadian operations and also the announcement last week that the president and CEO of the unit, Douglas Campbell, would leave at the end of the year.

The company board approved a rights offering of up to 40 million shares of Sears Canada Inc. Sears will still hold about 12 million shares of Sears Canada, valued at about $113 million.

Chairman and CEO Edward Lampert plans to fully exercise his subscription rights. ESL Investments Inc., of which Lampert is also chairman and CEO, will do the same.

The retailer, based in Hoffman Estates, Illinois, expects at least $168 million in proceeds from the rights offering in mid-to-late October, with the rest by early November. That, in combination with 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, will provide Sears Holdings with up to $1.45 billion in liquidity in fiscal 2014, according to Chief Financial Officer Rob Schriesheim.

The challenges still facing Lampert are enormous. The company 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 Its biggest albatross remains its stores, which critics say are outdated and shabby.

The company’s losses are mounting. For the quarter ended Aug. 2, Sears lost $573 million, up drastically from $194 million in the year ago period. That brought the company’s losses for the second half of the fiscal year to $975 million.

Lampert, a billionaire hedge fund investor, 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 affecting retailers on differing levels of the retail sector.

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.

The median net worth of families in the middle 20 percent of incomes fell 17 percent from 2010 to 2013, according to the Federal Reserve’s Survey of Consumer Finances. That is hitting Sears’ core customers hard.

The retailer is also trying to catch up to customers who are steering clear of stores and shopping online.

Sears recently announced that it was taking out a $400 million secured short-term loan from entities allied with Lampert’s ESL Investments.

Credit ratings agency Fitch Ratings called the loan a short-term fix for a “much larger need” of cash and downgraded Sears’ credit rating deeper into junk status.

Greg Melich, an analyst at International Strategy & Investment Group LLC, wrote Thursday that Sears is “on a glide path to be out of cash by the middle of 2015 without additional asset sales or liquidity initiatives.”

Shares rose more than 4 percent, or $1.10, to $26.28 in morning trading. Company shares are trading near three-year lows.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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