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Sears Joins Record Number Of Retailers To Default In Q1

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Sears Joins Record Number Of Retailers To Default In Q1

The problems for department store chain Sears continue, as it was the highest-profile of a record number of national retailers to default in one quarter.

Last month, Sears Holdings refinanced $500M in debt in what credit rating agencies deemed a "distressed exchange," which amounts to a default, CNN Money reports. That makes nine retail defaults in the first quarter, an all-time record according to Moody's and more than a quarter of 28 total corporate defaults in that period

Sears Holdings (which also owns Kmart) has resisted declaring bankruptcy despite its default, the fact that its remaining debt is still in junk bond status and despite the many stores it will close this year. The same cannot be said for mall-based piercing chain Claire's, which was also among the defaults in Q1. Claire's filed for Chapter 11 bankruptcy protection on March 19.

Some landlords are coming to the rescue of bankrupt retailers in hopes of minimizing vacancies in the near term. Bon-Ton, which owns its eponymous department store chain along with brands such as Boston, Younkers and Carson's, filed for bankruptcy in February, but a joint venture of its landlords will bid to buy it in an effort to prevent the liquidation of its assets and the closure of all of its stores, CNBC reports.

Washington Prime Group, an offshoot of Simon Property Group, and Namdar Realty Group will submit a joint bid at the bankruptcy auction scheduled for April 16. The auction was delayed to allow the bid, to the consternation of Bon-Ton's creditors (many of which are bidding to liquidate). Bon-Ton operated 250 stores at the time of its bankruptcy filing, and already plans to close 40 locations regardless of the auction's outcome.

Although the rash of defaults could be taken as a sign of the ongoing retail apocalypse, Moody's expects the rate of default to slow significantly in the coming year as interest rates remain low, according to CNN Money.

CORRECTION, April 16, 5:45 P.M. ET: A previous version of this story incorrectly listed the number of corporate and retail defaults in the first quarter. The story and headline have been updated.