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Sears Holdings Obtains $500MM Secured Loan Facility

April 11, 2016, 08:59 AM
Filed Under: Retail

Sears Holdings Corporation announced that certain of its subsidiaries (the "Borrowers") have entered into a 15 month $500 million committed secured loan facility (the "Loan Facility") maturing in July 2017. $250 million was funded under the Loan Facility today and up to an additional $250 million may be drawn by the Borrowers in the future. The Loan Facility, together with the previously announced$750 million Term Loan, will provide the Company with additional financial flexibility as it executes on its transformation to a more asset-light integrated retailer leveraging its membership based Shop Your Way® program.

"We have an asset rich portfolio which provides us with numerous options to finance our transformation strategy," said Robert A. Schriesheim, Executive Vice President and Chief Financial Officer for Sears Holdings. "The expected closing today of the previously announced $750 million Term Loan, together with this $500 million facility, provides $1.25 billion of committed financing. When considered together with our previously announced intention to monetize at least $300 million of assets, this set of actions would result in an aggregate of $1.5 billion of enhanced liquidity. As we have consistently demonstrated, we will continue to take actions to adjust our capital structure and manage our business to enable us to execute on our transformation while meeting all of our financial obligations."

The Loan Facility is secured by mortgages on 13 real properties owned by the Company's subsidiaries and will be secured by an additional eight real properties beginning on the date any additional amounts are drawn. The Loan Facility bears interest at a rate of 8% per annum and is guaranteed by the Company.

Under the terms of the Loan Facility, the Company is required to retain a broker and use commercially reasonable efforts to syndicate the Loan Facility. Eastdil Secured has been engaged by the Company to manage the syndication. Any lender who provides a portion of the Loan Facility as part of the syndication will be entitled to share (based on loan amount and time outstanding) in the origination and funding fees. Entities affiliated with ESL Investments, Inc., on the one hand, and Cascade Investment, L.L.C., on the other, each provided $125 million of the initial $250 million drawn under the Loan Facility and have committed to provide any portion of the Loan Facility that is not syndicated to other lenders. Edward S. Lampert, the Company's Chief Executive Officer and Chairman, controls ESL Investments, Inc.

The terms of the Loan Facility 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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