Sears 2006 Annual Report Download - page 74

SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
As of February 3, 2007, long-term debt maturities for the next five years and thereafter were as follows:
millions
2007 .............................................................. $ 613
2008 .............................................................. 356
2009 .............................................................. 376
2010 .............................................................. 566
2011 and thereafter ................................................... 1,551
$3,462
Interest
millions 2006 2005 2004
COMPONENTS OF INTEREST EXPENSE
Interest expense ................................................. $283 $236 $ 53
Accretion of obligations at net present value .......................... 45 62 50
Amortization of debt issuance costs ................................. 9 8 34
Accretion of debt discount on 9% convertible note ..................... — 17 9
Interest expense ................................................. $337 $323 $146
Debt Repurchase Authorization
In fiscal 2005, the Finance Committee of the Board of Directors of the Company authorized the repurchase,
subject to market conditions and other factors, of up to $500 million of the outstanding indebtedness of the
Company and its subsidiaries in open market or privately negotiated transactions. The Company’s wholly-owned
finance subsidiary, Sears Roebuck Acceptance Corp. (“SRAC”), has repurchased $158 million of its outstanding
notes, including $2 million repurchased during fiscal 2006, thereby reducing the unused balance of this
authorization to $342 million.
Credit Agreement
The Company’s $4.0 billion, five-year credit agreement (the “Credit Agreement”) has an expiration date of
March 2010 and is available for general corporate purposes and includes a $1.5 billion letter of credit sublimit.
The Credit Agreement is a revolving credit facility under which SRAC and Kmart Corporation are the borrowers.
The Credit Agreement is guaranteed by Holdings and certain of its direct and indirect subsidiaries and is secured
by a first lien on domestic inventory, credit card accounts receivable and the proceeds thereof. Availability under
the Credit Agreement is determined pursuant to a borrowing base formula, based on domestic inventory, subject
to certain limitations. As of February 3, 2007 and January 28, 2006, the Company had $196 million and $428
million of letters of credit outstanding under the Credit Agreement, respectively, with $3.8 billion and $3.6
billion, respectively, of availability remaining under the Credit Agreement. There were no direct borrowings
under the facility during either fiscal 2006 or fiscal 2005. The Credit Agreement does not contain provisions that
would restrict borrowings or letter of credit issuances based on material adverse changes or credit ratings.
The Company’s previous credit agreement (the “Credit Facility”) was an $800 million revolving credit
facility with an equivalent letter of credit sub-limit. In fiscal 2004, the Company reduced the size of the Credit
Facility, and effective January 3, 2005, the Company voluntarily terminated the Credit Facility. In conjunction
with these actions, the Company accelerated the amortization of $23 million in associated debt issuance costs.
From its inception, the Credit Facility was used only to support outstanding letters of credit.
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