Sears Holdings is borrowing $400m from an investment fund headed by the department store retailer's chairman and CEO Edward Lampert, in a move that comes days after Fitch Ratings lowered its credit rating on the company.

The loan is being made by entities affiliated with ESL Investments, in which Lampert is the sole shareholder.

The retailer said in a filing that it expects to use the proceeds of the loan for "general corporate purposes," adding that the maturity date could be extended from 31 December to 28 February as long as Sears does not default on its terms.

The news follows a downgrade in Sears Holdings' credit rating last week by Fitch Ratings amid concerns over the "magnitude of Sears' decline in profitability and lack of visibility to turn operations around."

Downgrading the company to double-C from triple-C, it warned funding options "may not be enough to support operations beyond 2016 given the significant cash burn in the business."

The ratings firm expects the retailer - which operates the Sears and Kmart stores - to post an EBITDA deficit of $1bn in 2014, "and potentially worse in 2015," with revenues seen contracting by 9-10%. Gross margins are expected to contract another 200 bps to 22%, on top of the 220 bps contraction in 2013.

In contrast, the company needs to generate a minimum EBITDA of $1bn annually between 2014 through 2016 to service its cash interest expense, capex, and pension plan contributions, it believes.   

Fitch concludes that given the high rate of cash burn in the business, Sears is likely to have to restructure within the next two years.