Sears reached the deal with Cyrus Capital Partners LP for the financing just before a hearing began in U.S. Bankruptcy Court for the Southern District of New York on the retailer’s so-called debtor-in-possession financing arrangements, according to a person familiar with the matter.
“The terms of the transaction were much less favorable than what we had agreed to,” said John Ahn, president at Great American Capital Partners.
A Cyrus spokeswoman had no immediate comment.
A Sears spokesman declined to comment on the deal for the $350 million loan, which U.S. Bankruptcy Judge Robert Drain approved at the hearing.
The loan adds to $300 million that banks provided Sears when it filed for bankruptcy protection in October, giving the beleaguered retailer a total of $650 million in financing.
“These loans are going to benefit everybody,” Drain said.
Hedge funds, including Cyrus, have been in talks with Sears over the past several weeks regarding financing to help it continue operating during bankruptcy proceedings, according to people familiar with the matter.
Sears’ bankruptcy had been expected for years in light of a lengthy slump in sales since the 2008 financial crisis, seven straight years of losses and a debt load of some $5 billion.
Earlier this month, Sears won bankruptcy-court approval to advance plans to stay in business and find a buyer even as it evaluates offers from liquidators.
Some creditors have said Sears should consider winding down by letting liquidators sell its assets in the same way Sports Authority did two years ago and Toys “R” Us did this year when it shut all of its U.S. brick-and-mortar locations.
Sears has already said it intends to close about 180 stores while its chairman, Eddie Lampert, a billionaire who runs hedge fund ESL Investments Inc, works on a potential bid to keep Sears in business.
