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Sears Holdings Enters Amended Second Lien Credit Facility

July 10, 2017, 07:17 AM
Filed Under: Retail

Sears Holdings Corporation announced that it has entered into an amendment to its existing Second Lien Credit Facility dated September 1, 2016.  The amended credit facility provides an uncommitted line of credit facility under which subsidiaries of the Company may from time to time borrow line of credit loans, subject to applicable borrowing base limitations, in an aggregate principal amount not to exceed $500 million at any time outstanding. Individual Line of Credit Loans under the Line of Credit Facility are expected to have maturities of up to 179 days and will be on pricing and other terms to be agreed with the lenders that are or become party to the Second Lien Credit Facility.

Edward S. Lampert, the Company's Chief Executive Officer and Chairman, is the sole stockholder, chief executive officer and director of ESL Investments, Inc. (ESL), which controls the Agent under the Line of Credit Facility.  ESL has indicated that it is considering participating in the Line of Credit Facility as a lender, but ESL is under no obligation to do so. The Company intends to discuss additional Line of Credit Facility advances with additional lenders from time to time.

"This facility is intended to provide the Company with the flexibility to generate additional liquidity on an as-needed basis. Any extensions of credit under this facility are collateralized by a second lien on certain of our inventory, receivables and related assets. This adjustment to our capital structure demonstrates that Sears Holdings will continue to take actions to generate liquidity and manage our business while meeting all of our financial obligations," said Rob Riecker, Sears Holdings' Chief Financial Officer.

Additionally, in June the Company closed on over $200 million of real estate transactions, which resulted in a paydown of the April 2016 Real Estate Loan from $500 million to $347 million. These actions also increased availability under the short term borrowing basket in the Company's ABL credit facility, pursuant to which the Company can raise up to $1.0 billion in loans that can mature within the June 2020 ABL maturity. After the partial loan repayment, the real estate loan will be utilizing approximately $350 million of the $1.0 billion basket compared to $500 million previously.  Additional net proceeds of $57 million from the real estate transactions were used to reduce the outstanding balance on our revolving credit facility.

The terms of the Line of Credit Facility and, to the extent funded by ESL, the initial Line of Credit Loans were approved by the Related Party Transactions Subcommittee of the Board of Directors of the Company, with advice from Centerview Partners and Weil Gotshal & Manges, the Subcommittee's outside financial and legal advisors.

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