Orchard Supply announces $405 million debt offering

By Paul A. Harris

St. Louis, Oct. 7 - Orchard Supply Hardware Stores Corp. expects to issue about $405 million of debt backing Ares Management LLC's purchase of 19.9% of the company's stock from Sears Holdings Corp., according to a Friday news release.

A source from Sears declined to make any comment on the transaction when contacted Friday by Prospect News.

Citigroup and Lehman Brothers advised Sears on the transaction.

According to the news release, Ares Management has agreed to invest $58.7 million in cash for the stock and a three-year option to purchase, for $126.8 million, an additional 30.2% of that company.

Sears Holdings also announced that it expects its wholly owned subsidiary, Sears, Roebuck and Co., to receive a dividend from Orchard of about $450 million.

Sears Holdings will retain an 80.1% equity interest in Orchard Supply Hardware, which would be reduced to about 49.9% should the option be exercised in the next three years. The transaction is expected to close in the fourth quarter of 2005, subject to regulatory approval and completion of Orchard Supply Hardware's debt issue.

San Jose, Calif.-based Orchard Supply operates a chain of 84 hardware and garden retail stores located throughout California.

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