Sears extends maturity date of $271 million letter-of-credit facility

By Marisa Wong

Morgantown, W.Va., Aug. 3 – Sears Holdings Corp., through Sears Roebuck Acceptance Corp. and Kmart Corp., entered into an amendment on Tuesday to the letter-of-credit agreement dated Dec. 28, 2016 with Citibank, NA as administrative agent to extend the maturity of the $271 million committed under the existing facility, according to an 8-K filing with the Securities and Exchange Commission.

The maturity date was extended through Dec. 28, 2018 from Dec. 28, 2017.

The amendment also eliminates the unused portion of the facility, increases pricing and releases all real estate collateral that secured the facility.

The facility is guaranteed by the same subsidiaries that guarantee the obligations under the company’s third amended and restated credit agreement dated July 21, 2015 with Bank of America, NA as agent and is secured by substantially the same collateral securing that credit agreement.

The amended letter-of-credit facility contains a borrowing base calculation that requires the borrowers to cash collateralize the letter-of-credit facility if the aggregate obligations under the Bank of America credit agreement and amended letter-of-credit facility exceed the modified borrowing base.

To secure their obligation to participate in letters of credit issued under the letter-of-credit facility, the lenders, JPP, LLC and JPP II, LLC, are required to maintain cash collateral on deposit with the Citibank in an amount equal to 102% of the commitments.

The borrowers are required to pay the lenders an upfront fee equal to 1% of the aggregate amount of the lender deposit.

In addition, the borrowers are required to pay a commitment fee on the average daily amount of the lender deposit, as well as some other fees. The commitment fee is now Libor plus 110 basis points, instead of 5.75% previously.

In the event of reductions of the commitments under the letter-of-credit facility or a termination of the letter-of-credit facility prior to the six-month anniversary of the amendment effective date, the borrowers will be required to pay an early reduction or termination fee equal to the commitment fee that would have accrued with respect to the reduced or terminated commitments from the date of reduction or termination until the six-month anniversary.

The letter-of-credit facility permits the lenders to syndicate all or a portion of their commitments to other lenders in some cases. The lenders have advised the borrowers that they expect to syndicate over 50% of their portion of the letter-of-credit facility to one or more third parties. None of the lenders will receive any syndication fee or compensation in connection with this syndication.

Citigroup Global Markets Inc. is acting as lead arranger and bookrunner.

Sears is a retailer based in Hoffman Estates, Ill. Edward S. Lampert, Sears’ chief executive officer and chairman, is the sole stockholder, chief executive officer and director of ESL Investments, Inc., which controls JPP and JPP II.

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