Sears defends self against report of vendor issue
NEW YORK - Sears said Wednesday that it has significant financial flexibility to meet its obligations after a media report said that one of its vendors stopped shipments because some insurance firms for the retailer's suppliers are looking to lower coverage.
Earlier in the day Bloomberg reported, citing anonymous sources, that insurer Euler Hermes Group has sent out cancellation notices and that fellow insurer Coface SA has indicated that it plans to do the same.
Euler Hermes and Coface both declined to comment to The Associated Press.
The media report also said that Atradius Credit Insurance is reducing coverage but has not yet pulled policies. Atradius did not immediately respond to an email from the AP seeking comment.
The report stated that the situation has prompted a supplier to withhold products from Sears following a recommendation from its credit department. Sears said in its statement that it has not had any "material interruption" in shipments of goods.
Shares of Sears dropped $3.96, or 13.1 percent, to $26.34 in afternoon trading.
Hoffman Estates-based Sears Holding Corp. said in a statement that it has breathing room financially. Last week the company - which runs Sears and Kmart stores - said that it would sell most of its stake in its Canadian unit to raise as much as $380 million. The retailer has also received a $500 million dividend related to the spinoff of Lands' End; recently completed a $400 million short-term loan and received $165 million in proceeds from some real estate transactions. All in, Sears said it will have generated up to about $1.45 billion in liquidity in fiscal 2014.
Sears added that it has no significant debt maturing until late 2018, continues to have a valuable real estate portfolio and has approximately $6.5 billion in inventory that's mostly paid for.
Sears said it continues to pay its vendors and suppliers and has never had to pay a claim to a vendor tied to its business.
"We are meeting our obligations and have ample inventory and liquidity to operate our business," the company said.
Sears previously announced that it plans to work with its lenders and others over the next six months to a year to evaluate its capital structure so that it can have more long-term flexibility. The company said that it may take other actions as appropriate.