Sears 2013 Annual Report Download - page 50

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net proceeds of this offering to repay borrowings outstanding under a previous domestic credit agreement on the
settlement date and to fund the working capital requirements of our retail businesses, capital expenditures and for
general corporate purposes. The indenture under which the Notes were issued contains restrictive covenants that,
among other things, (1) limit the ability of the Company and certain of its domestic subsidiaries to create liens and
enter into sale and leaseback transactions and (2) limit the ability of the Company to consolidate with or merge into,
or sell other than for cash or lease all or substantially all of its assets to, another person. The indenture also provides
for certain events of default, which, if any were to occur, would permit or require the principal and accrued and
unpaid interest on all the then outstanding notes to be due and payable immediately. Generally, the Company is
required to offer to repurchase all outstanding Notes at a purchase price equal to 101% of the principal amount if the
borrowing base (as calculated pursuant to the indenture) falls below the principal value of the notes plus any other
indebtedness for borrowed money that is secured by liens on the Collateral for two consecutive quarters or upon the
occurrence of certain change of control triggering events. The Company may call the Notes at a premium based on
the “Treasury Rate” as defined in the indenture, plus 50 basis points. On September 6, 2011, we completed our offer
to exchange the Notes held by nonaffiliates for a new issue of substantially identical notes registered under the
Securities Act of 1933, as amended.
Sears Canada Credit Agreement
In September 2010, Sears Canada entered into a five-year, $800 million Canadian senior secured revolving
credit facility (the “Sears Canada Facility”). The Sears Canada Facility is available for Sears Canada’s general
corporate purposes and is secured by a first lien on inventory and credit card receivables. Availability under the
Sears Canada Facility is determined pursuant to a borrowing base formula based on inventory and credit card
receivables, subject to certain limitations. At February 1, 2014 and February 2, 2013 we had no borrowings
outstanding under the Sears Canada Facility. Availability under this agreement was approximately $336 million
($374 million Canadian) and $503 million ($502 million Canadian), respectively, at February 1, 2014 and
February 2, 2013. The current availability may be reduced by reserves currently estimated by the Company to be
approximately $177 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 $135 million the
lenders could apply. The potential additional reserve amount may increase or decrease in the future based on
estimated net pension liabilities.
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 1, 2014 and February 2, 2013, we had
outstanding commercial paper borrowings of $9 million and $345 million, respectively. ESL held none of our
commercial paper at February 1, 2014, including any held by Edward S. Lampert. ESL held $285 million of our
commercial paper at February 2, 2013, including $169 million held by Edward S. Lampert. See Note 15 of Notes to
Consolidated Financial Statements for further discussion of these borrowings.