PrefBlog

They don’t issue preferreds, but this is interesting anyway – S&P downgraded Sears by two notches:

• The decline in operating performance at U.S. retailer Sears accelerated in 2011, and we expect operating performance to remain pressured in 2012, potentially resulting in negative EBITDA.
• Sears’ liquidity sources will narrow, given the negative EBITDA we expect and the need to fund operating losses, capital spending, and pension contributions.
• We are lowering our corporate credit rating on the company to ‘CCC+’ from ‘B’ and the short-term and commercial paper ratings for Sears Roebuck Acceptance to ‘C’ from ‘B-2’.
• The negative outlook reflects our expectation that Sears’ liquidity could diminish in 2013.

This means that Eddy Lampert could be in trouble:

Edward Lampert’s hedge fund cut its stake in AutoZone (AZO) Inc. late last month to meet client redemptions amid a series of setbacks at Sears Holdings Corp. (SHLD), one of its biggest and highest-profile investments.

ESL Investments Inc., the firm run by Lampert, distributed about $1.02 billion worth of AutoZone stock to investors in connection with the closing of one investment partnership and the restructuring of another, according to a regulatory filing yesterday. The Greenwich, Connecticut-based firm also used $351.4 million of shares in AutoZone and AutoNation Inc. (AN) as payment in kind to meet year-end redemptions from its main fund, ESL Partners LP, the filing showed.

Lampert has been selling AutoZone and AutoNation shares while holding onto his entire stake in Sears, a strategy that could leave his main hedge fund further concentrated in the Hoffman Estates, Illinois-based retailer. AutoZone rose 19 percent last year and AutoNation shares gained 31 percent, while Sears shares plummeted 56 percent.

It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 29bp, FixedResets up 7bp and DeemedRetractibles gaining 22bp. For the second successive day there was a lengthy list of issues gaining more than 1% – with SLF issues notable for their presence among the better performers, while Floaters continued to signal retail expectations of inflationary times ahead. Volume remained significantly below average, but it is recovering.

This entry was posted on Thursday, January 5th, 2012 at 11:08 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.