Sears Stock Below $1 for the First Time, Runs Delisting Risk

Shares of Sears Holding Corp. (SHLD) have plunged nearly 15% as of Friday afternoon, bringing the brick-and-mortar retailer's year-to-date (YTD) loss to a whopping 75%, compared to the S&P 500's 9.1% return over the same period. 

(For more, see also: Who Killed Sears? 50 Years on the Road to Ruin.)

Liquidity Constraints Put Retailer at Risk

The owner of Sears and Kmart stores has suffered over the recent years, facing double-digits sales declines, a mounting debt load, and pension liabilities. While traditional retailers have broadly made a comeback this year, Sears' move to close hundreds of physical stores and sell off assets to relieve the cash-strapped business, but these moves have yet to help it secure a turnaround. Now, Eddie Lampert, the chief executive officer (CEO) of the Hoffman Estates, Illinois-based company, plans to use his ESL Investments hedge fund to restructure Sears and save it from bankruptcy, as outlined by CNBC.

Lampert detailed plans for Sears to pay off certain loans, many of which are owned by ESL, and swap out other debt for notes that convert to equity. The hedge fund's proposal, filed with the Securities and Exchange Commission (SEC) on Monday, would reduce the retailer's total debt by roughly 80% to $1.24 billion. 

Sears has disclosed its "significant near-term liquidity constraints" as it faces a major debt payment next month. On Oct. 1, Sears must meet debt maturity reserve requirements pertaining to a note that has a $134 million maturity date on Oct. 15, as reported by CNBC

To add to Sears' woes, the stock now risks being delisted from the Nasdaq, which maintains a $1 bid price requirement. The exchange allows companies 30 days to trade consecutively below that mark, and then typically another 180 days to meet requirements again. According to the Nasdaq's website, another 180 days can be allowed to meet compliance after that. 

Moving forward, Sears is at major risk of delisting from the Nasdaq unless it figures out a way to increase its liquidity, a task that continues to prove challenging. Moody's senior analyst Christina Boni tells CNBC that while the company has had some success in improving its maturity profile, it has been fruitless in generating cash flow. Sears is currently weighing a separate proposal from ESL Investments to buy its Kenmore brand for $400 million.