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A Looming Sears Bankruptcy Could Obliterate Its Landlord Seritage

Prospects that Sears Holdings (SHLD) could be broke within dual years shortly could send investors in genuine estate investment trust (REIT) Seritage Growth Properties (SRG) using for a exit.

Shares in Seritage are adult about 28% this year even amid signs that a REIT, spun off from Sears final year to lift about $2.7 billion in cash, could face critical cash-flow problems if Sears goes under.

The latest questions about Sears’ viability arrived on Wednesday, when Fitch Ratings pronounced a association acted «significant default risk» within a subsequent 12 to 24 months due to years of diseased store trade and high levels of debt.

«Default risk means many expected a bankruptcy, or a Chapter 11 filing,» pronounced one of a report’s authors, Sharon Bonelli, in a phone interview, definition that a association will possibly have to repay to compensate behind a creditors, or rearrange in failure justice and wish to stay alive by rising as a smaller entity.

At emanate for Sears, that is battling disappearing money upsurge amid a enlarged widen of losses, is repaying some $2.8 billion in high produce holds and institutional tenure loans entrance due in a subsequent few years.

Sears’ «restructuring risk is high over a subsequent twelve months, as a ‘CC’ rating would suggest,» pronounced Monica Aggarwal, handling executive of Fitch’s sell team.

If Sears is forced to rearrange or liquidate, that could also spell doom for Seritage, whose portfolio of 266 sell properties includes 170 leased to Sears and another 82 leased to Kmart, a company’s bonus unit. About 79 percent of Seritage’s let income this year comes from Sears.

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