Sears 2009 Annual Report Download - page 41

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In fiscal 2005, the Finance Committee of our Board of Directors authorized the repurchase, subject to
market conditions and other factors, of up to $500 million of our outstanding indebtedness in open market or
privately negotiated transactions. The source of funds for the purchases is our cash from operations or
borrowings under the Credit Agreement. Our wholly owned finance subsidiary, Sears Roebuck Acceptance Corp.
(“SRAC”), has repurchased $215 million of its outstanding notes, including $6 million repurchased during fiscal
2009, $49 million repurchased during fiscal 2008 and $2 million repurchased during fiscal 2007, thereby
reducing the unused balance of this authorization to $285 million. We recognized a gain of $13 million on the
repurchases made during fiscal 2008.
Certain of our debt is variable rate and we therefore manage interest rate risk through the use of fixed and
variable-rate funding and interest rate derivatives. At each of January 30, 2010, January 31, 2009 and February 2,
2008, we had interest rate derivatives with notional amounts of $120 million and nominal fair values.
Required Debt Repayments in 2010
The long-term debt maturities occurring in the upcoming 2010 fiscal year are primarily for Sears Canada
and Orchard Supply Hardware (“OSH”) borrowings as follows:
Issue
Due in
Fiscal 2010
Sears Canada debentures and medium-term notes ................. $281
OSH collateralized mortgage-backed loan ...................... 120
Principal payments on capital lease obligations .................. 60
Other .................................................... 21
Total 2010 long-term debt maturities .......................... $482
Sears Canada and OSH are not wholly owned subsidiaries and therefore finance their operations separately
from Holdings. Accordingly, their debt is non-recourse to Holdings. Both Sears Canada and OSH believe that
they have adequate resources and access to capital markets to repay or refinance these maturities.
Debt Ratings
The ratings of our domestic debt securities as of January 30, 2010 appear in the table below:
Moody’s
Investors
Service
Standard &
Poor’s
Ratings
Services
Fitch
Ratings
Unsecured long-term debt ................................ Ba3 BB- BB
Unsecured commercial paper .............................. NP B-2 B
Credit Agreement
During the second quarter of 2009, we extended the maturity date of our credit agreement (“Original Credit
Agreement”) by entering into an amended credit agreement (the “Amended Credit Agreement”) which has an
expiration date of June 22, 2012. The Amended Credit Agreement is an asset based revolving credit facility
under which SRAC and Kmart Corporation are the borrowers. Our Original Credit Agreement, which was to
expire on March 24, 2010, provided $4.0 billion of borrowing capacity, however only approximately $3.8 billion
had been available since September 2008 when an affiliate of Lehman Brothers notified us it would no longer
fund its proportionate share of commitments under the Original Agreement. Also during the second quarter of
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