Sears Falls After Vendor Loans Are Said to Be Halted by CIT

Publication: Bloomberg Businessweek
Published Date: 1/17/2012

Sears Holdings Corp. declined after two people familiar with the situation said suppliers will no longer be able to get loans or payment guarantees from CIT Group Inc. for their shipments to the retailer.

Sears fell 4.8 percent to $31.33 at 11:54 a.m. in New York. The Hoffman Estates, Illinois-based company’s shares dropped 56 percent last year.

CIT, the largest U.S. company that provides what’s known as factoring, told clients it would no longer approve credit for orders starting today, according to the people, who declined to be identified because the information isn’t public.

One risk when a factoring company pulls credit to suppliers is that others may follow suit. Some factors already have become reluctant to take on shipments to Sears, while others are demanding a “substantial” premium, Bobby Cohen, chief executive officer of Lochem Capital, said today in an interview.

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