Sears 2012 Annual Report Download - page 45

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Sears Canada Facility is determined pursuant to a borrowing base formula based on inventory and credit card
receivables, subject to certain limitations. At February 2, 2013 we had no borrowings outstanding under the Sears
Canada Facility. At January 28, 2012, we had approximately $101 million ($101 million Canadian) of borrowings
outstanding under the Sears Canada Facility. Availability under this agreement was approximately $503 million
($502 million Canadian) and $415 million ($415 million Canadian), respectively, at February 2, 2013 and
January 28, 2012. The current availability may be reduced by reserves currently estimated by the Company to be
approximately $300 million, which may be applied by the lenders at their discretion pursuant to the Credit Facility
agreement. As a result of judicial developments relating to the priorities of pension liability relative to certain
secured obligations, Sears Canada has executed an amendment to the Sears Canada Credit Facility which would
provide additional security to lenders, with respect to the Company's unfunded pension liability by pledging certain
real estate assets as collateral thereby partially reducing the potential reserve amounts by up to $150 million the
lenders could apply. The potential additional reserve amount may increase or decrease in the future based on
estimated net pension liabilities.
Letters of Credit Facility
Effective March 15, 2013, we agreed to terminate our $500 million uncommitted letter of credit facility dated
January 20, 2011 with Wells Fargo Bank, National Association ("Wells Fargo") in advance of the scheduled
termination date of January 20, 2014, as no letters of credit have been issued and outstanding under the facility since
May 2011. The facility was secured by a first priority lien on cash placed on deposit at Wells Fargo in an amount
equal to 103% of the face value of all issued and outstanding letters of credit.
Debt Repurchase Authorization
In 2005, our Finance Committee of the 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. Our wholly owned finance subsidiary, Sears Roebuck Acceptance Corp. (“SRAC”), has
repurchased $215 million of its outstanding notes. In 2011, Sears Holdings repurchased $10 million of senior
secured notes, recognizing a gain of $2 million. The unused balance of this authorization is $275 million
Unsecured Commercial Paper
We borrow through the commercial paper markets. At February 2, 2013 and January 28, 2012 , we had
outstanding commercial paper borrowings of $345 million and $337 million, respectively. ESL held $285 million
and $250 million, respectively, of our commercial paper at February 2, 2013 and January 28, 2012, including $169
million and $130 million, respectively, held by Edward S. Lampert. See Note 15 for further discussion of these
borrowings.
Debt Ratings
Our corporate family debt ratings at February 2, 2013 appear in the table below:
Moody’s
Investors Service Standard & Poor’s
Ratings Services Fitch Ratings
B3 CCC+ CCC
Domestic Pension Plan Funding
Contributions to our pension plans remain a significant use of our cash on an annual basis. While the
Company's pension plan is frozen, and thus associates do not currently earn pension benefits, the company has a
legacy pension obligation for past service performed by Kmart and Sears associates. During 2012, we contributed
$516 million to our domestic pension plans. We estimate that the domestic pension contribution will be $352 million
in 2013 and approximately $510 million in 2014, though the ultimate amount of pension contributions could be
affected by changes in the applicable regulations as well as financial market and investment performance.