Sears gets $100 million term loan, amends note borrowing base; other changes sought

By Susanna Moon

Chicago, Jan. 10 – Sears Holdings Corp. said it has obtained a $100 million term loan, backed by ground leases and intellectual property, and may raise another $200 million against the same collateral.

Sears also has amended its second-lien notes due Oct. 15, 2018 to lift the borrowing base and is holding talks with lenders to try to improve the terms of more than $1 billion of non-first lien debt, according to a press release.

Specifically, the company increased the borrowing base advance rate for inventory to 75% from 65% and deferred the collateral coverage test for purposes of the repurchase offer covenant in the indenture to restart it with the second quarter of 2018, with corresponding amendments to its second-lien credit agreement. For the notes, no collateral coverage event can occur until the end of the third quarter of 2018.

For the loans, the company is seeking to slash cash interest expenses and to extend the maturity of some of the debt.

Sears said it is also aiming to line up a secured credit facility, consisting of a $407 million first-lien tranche and a second-lien tranche of up to $200 million, secured by the 138 properties that are in a ring-fence arrangement with the Pension Benefit Guaranty Corp. with an appraised value of about $985 million.

The company’s plans also include cost reductions of $200 million on an annualized basis in 2018 unrelated to store closures.

“As previously announced, we are actively pursuing transactions to adjust our capital structure in order to generate liquidity and increase our financial flexibility,” Rob Riecker, Sears Holdings' chief financial officer, said in the press release.

“The new capital we have secured represents meaningful progress towards those objectives and demonstrates that we continue to have options to finance our business,” he added.

Added Edward S. Lampert, chairman and chief executive officer of Sears: “The initiatives we have announced today build on those achievements and make clear our determination to remain a viable competitor in the challenging retail environment.”

Sears is a retailer based in Hoffman Estates, Ill.

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