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JPP is Adminstrative Agent for Sears $300MM Second Lien Loan

September 06, 2016, 07:33 AM
Filed Under: Retail

On Sep. 1, 2016, Sears Holdings Corporation, Sears Roebuck Acceptance Corp. (“SRAC”) and Kmart Corporation (together with SRAC, the “Borrowers”) entered into a Second Lien Credit Agreement (the “Credit Agreement”) with the Lenders (as defined below) and JPP, LLC, as administrative agent and collateral administrator (the “Agent”), pursuant to which the Borrowers borrowed $300 million of term loans (the “Term Loan”). Mr. Edward S. Lampert, the Company’s Chief Executive Officer and Chairman, is the sole stockholder, chief executive officer and director of ESL Investments, Inc., which controls JPP, LLC and JPP II, LLC, the lenders under the Credit Agreement (the “Lenders”). The Company expects to use the proceeds of the Term Loan for general corporate purposes.

The maturity date for the Term Loan is July 20, 2020 and the Term Loan will not amortize. The Credit Agreement includes an accordion feature that allows the Borrowers to seek to obtain from third parties up to $200 million of additional loans under the Credit Agreement on the same terms as the Term Loan.

The Term Loan will bear interest at a rate equal to, at the election of the Borrowers, either the London Interbank Offered Rate (“LIBOR”) (subject to a 1.00% floor) or a specified prime rate (“Base Rate”), in either case plus an applicable margin. The margin with respect to the Term Loan is 7.50% for LIBOR loans and 6.50% for Base Rate loans.

Pursuant to the Security Agreement (as defined below) the Company’s obligations under the Credit Agreement are secured on a pari passu basis with the Company’s obligations under that certain Indenture, dated as of October 12, 2010, by and among the Company, the Company subsidiaries from time to time party thereto and Wilmington Trust, National Association, as successor collateral agent (“Wilmington Trust”), pursuant to which the Company issued its 6  5⁄8% Senior Secured Notes due 2018 (the “Notes”). The collateral includes inventory, receivables and other related assets of the Company and its subsidiaries which are obligated on the Term Loan and the Notes. The Credit Agreement will be guaranteed by all domestic subsidiaries of the Company that guarantee the Company’s obligations under its existing revolving credit facility.

The Credit Agreement includes customary representations and warranties, covenants and other undertakings, which representations and warranties, covenants and undertakings are subject to important qualifications and limitations set forth in the Credit Agreement. The Credit Agreement also contains customary events of default, including (subject to certain materiality thresholds and grace periods) payment default, failure to comply with covenants, material inaccuracy of representation or warranty, and bankruptcy or insolvency proceedings. If there is an event of default, the Lenders may declare all or any portion of the outstanding indebtedness to be immediately due and payable, and exercise any rights they might have under any of the related facility documents (including against the collateral), subject to the Security Agreement and the Intercreditor Agreement (as defined below).

Also on September 1, 2016, the Company amended that certain Security Agreement, dated as of October 12, 2010 (together with all exhibits and schedules attached thereto, as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”), among the Company, the subsidiaries of the Company from time to time party thereto as grantors and Wilmington Trust, to cure certain ambiguities, omissions, defects or inconsistencies in the Security Agreement (the “Security Agreement Amendment”).


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