HOFFMAN ESTATES, Ill. — Bond investors are turning against Edward Lampert’s Sears Holdings as the largest U.S. department-store chain burns through cash to reward shareholders.
Fitch Ratings cut the retailer’s rating Tuesday to B, five levels below investment grade, citing a “precipitous decline” in earnings. Credit-default swaps on Sears’ finance unit are at about the highest level in more than two years, data provider CMA said.
Sears, which said last month it would spend as much as $500 million to buy back shares after losing $170 million in the first quarter, is facing growing competition from J.C. Penney, which last week hired the Apple executive who helped the electronics maker drive growth through retail stores.
The repurchases are sending the wrong message to debt investors, said Greg Kocik, a portfolio manager at TD Asset Management.
“It’s not appropriate for a company with this kind of uncertainty,” Kocik said. Bloomberg News
