Sears 2013 Annual Report Download - page 79

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SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
79
Interest
Interest expense for years 2013, 2012 and 2011 was as follows:
millions 2013 2012 2011
COMPONENTS OF INTEREST EXPENSE
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 217 $ 232 $ 248
Accretion of lease obligations at net present value. . . . . . . . . . . . . . . . . . . . . . . . . . . 16 17 20
Amortization of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 18 21
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 254 $ 267 $ 289
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 for further
discussion of these borrowings.
Domestic Credit Agreement
During the first quarter of 2011, Sears Roebuck Acceptance Corp. ("SRAC"), Kmart Corporation (together
with SRAC, the "Borrowers") and Holdings entered into an amended credit agreement (the “Domestic Credit
Agreement”). The Domestic Credit Agreement provides for a $3.275 billion asset-based revolving credit facility (the
"Revolving Facility") with a $1.5 billion letter of credit sub-limit. On October 2, 2013, Holdings and the Borrowers
entered into a First Amendment (the "Amendment") to the Domestic Credit Agreement with a syndicate of lenders.
Pursuant to the Amendment, the Borrowers borrowed $1.0 billion under a new senior secured term loan facility (the
"Term Loan").
Advances under the Domestic Credit Agreement bear interest at a rate equal to, at the election of the
Borrowers, either the London Interbank Offered Rate (“LIBOR”) or a base rate, in either case plus an applicable
margin. The Domestic Credit Agreement’s interest rates for LIBOR-based borrowings vary based on leverage in the
range of LIBOR plus 2.0% to 2.5%. Interest rates for base rate-based borrowings vary based on leverage in the
range of the applicable base rate plus 1.0% to 1.5%. Commitment fees are in a range of 0.375% to 0.625% based on
usage. The Revolving Facility is in place as a funding source for general corporate purposes and is secured by a first
lien on most of our domestic inventory and credit card and pharmacy receivables, and is subject to a borrowing base
formula to determine availability. The Revolving Facility permits aggregate second lien indebtedness of up to $2.0
billion, of which $1.2 billion in second lien notes were outstanding at February 1, 2014, resulting in $760 million of
permitted second lien indebtedness, subject to limitations imposed by a borrowing base requirement under the
indenture that governs our 6 5/8% senior secured notes due 2018. The Revolving Facility is expected to expire in
April 2016.
The Term Loan bears interest at a rate equal to, at the election of the Borrowers, either (1) LIBOR (subject to a
1.00% LIBOR floor) or (2) the highest of (x) the prime rate of the bank acting as agent of the syndicate of lenders,
(y) the federal funds rate plus 0.50% and (z) the one-month LIBOR rate plus 1.00% (the highest of (x), (y) and (z),
the "Base Rate"), plus an applicable margin for LIBOR loans of 4.50% and for Base Rate loans of 3.50%. Beginning
February 2, 2014, the Borrowers are required to repay the Term Loan in quarterly installments of $2.5 million, with