Sears 2012 Annual Report Download - page 101

SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
101
Unsecured Commercial Paper
During 2012 and 2011, ESL and its affiliates purchased unsecured commercial paper issued by Sears Roebuck
Acceptance Corp. (“SRAC”), an indirect wholly owned subsidiary of Holdings. For the commercial paper
outstanding to ESL, the weighted average of each of maturity, annual interest rate, and principal amount outstanding
for this commercial paper was 31.6 days, 2.38% and $202 million and 29.2 days, 1.51% and $230 million,
respectively, in 2012 and 2011. The largest aggregate amount of principal outstanding to ESL at any time since the
beginning of 2012 was $325 million and the aggregate amount of interest paid by SRAC to ESL during 2012 was $4
million. ESL held $285 million, and $250 million, respectively, in principal amount of commercial paper at
February 2, 2013, and January 28, 2012, which included $169 million, and $130 million, respectively, held by
Mr. Lampert. The commercial paper purchases were made in the ordinary course of business on substantially the
same terms, including interest rates, as terms prevailing for comparable transactions with other persons, and did not
present features unfavorable to the Company.
Senior Secured Notes
In 2011, Mr. Lampert and ESL purchased an aggregate of $95 million of principal amount of the Company’s 6
5/8% Senior Secured Notes due 2018 (the "6 5/8% Notes") and $10 million of principal amount of unsecured notes
issued by SRAC and another indirect wholly owned subsidiary of Sears Holdings, Sears DC Corp. (the “Subsidiary
Notes”). At February 2, 2013, Mr. Lampert and ESL held an aggregate of $95 million of principal amount of 6 5/8%
Notes and $1 million and $2 million, respectively, of principal amount of Subsidiary Notes. At January 28, 2012,
Mr. Lampert and ESL held an aggregate of $95 million of principal amount of 6 5/8% Notes and $4 million and $10
million, respectively, of principal amount of Subsidiary Notes.
Trade Receivable Put Agreements
On January 26, 2012, ESL entered into an agreement with a financial institution to acquire from the financial
institution an undivided participating interest in a certain percentage of its rights and obligations under trade
receivable put agreements that were entered into with certain vendors of the Company. These agreements generally
provide that, in the event of a bankruptcy filing by the Company, the financial institution will purchase such
vendors’ accounts receivable arising from the sale of goods or services to the Company. ESL may from time to time
choose to purchase an 80% undivided participating interest in the rights and obligations primarily arising under
future trade receivable put agreements that the financial institution enters into with our vendors during the term of its
agreement. The Company is neither a party nor will it become a party to any of these agreements. At February 2,
2013 and January 28, 2012, ESL held a participation interest totaling $234 million and $93 million, respectively, in
the financial institution’s agreements relating to the Company.
Sears Canada
ESL owns approximately 28% of the outstanding common shares of Sears Canada.
SHO
Holdings, and certain of its subsidiaries, engage in transactions with SHO pursuant to various agreements with
SHO which, among other things, (1) govern the principal transactions relating to the rights offering and certain
aspects of our relationship with SHO following the separation, (2) establish terms under which Holdings and certain
of its subsidiaries will provide SHO with services, and (3) establish terms pursuant to which Holdings and certain of
its subsidiaries will obtain merchandise for SHO. ESL owns approximately 63% of the outstanding common stock
of SHO (based on publicly available information as of October 11, 2012).
These agreements were made in the context of a parent-subsidiary relationship and were negotiated in the
overall context of the separation. The Company believes that the methods by which costs are allocated are
reasonable and are based on prorated estimates of costs expected to be incurred by the Company. A summary of the
nature of related party transactions involving SHO is as follows:
• SHO obtains a significant amount of its merchandise from the Company. We have also entered into certain
agreements with SHO to provide logistics, handling, warehouse and transportation services. SHO also pays
a royalty related to the sale of Kenmore, Craftsman and DieHard products and fees for participation in the
SHOP YOUR WAY program.