ESL Issues Shares To Cover Redemptions

Jun 14 2013 | 11:27am ET

For the third time in two years, ESL Investments has paid out redemptions in-kind.

Investors redeeming from the Bay Harbor, Fla.-based firm received shares of AutoNation Inc. and Orchard Supply Hardware Stores Corp. on Monday, ESL told the Securities and Exchange Commission this week. The distributions were made "on a pro rata basis to limited partners that elected to redeem all or a portion of their limited partnership interests in June 2013."

Paying out redemptions in-kind rather than in cash protects ESL's remaining investors from paying capital-gains taxes on the sales. But the $393 million distribution in AutoNation shares, accounting for 41% of ESL's stake in the company, leaves those remaining investors even more heavily reliant on ESL's major investment, retailer Sears Holdings Corp., which has fallen 19% in the last several weeks. ESL chief Edward Lampert is Sears' CEO.

This week's in-kind payouts follow similar moves in February and November of last year.

ESL investors have been heading for the doors recently; 86 of its 250 investors redeemed last year, which also saw ESL's assets drop by 24% to $5.1 billion. ESL lost 4% through the first nine months of last year.

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