Sears 2014 Annual Report Download - page 50

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the remainder of the Term Loan maturing June 30, 2018. Beginning with the fiscal year ending January 2015, the
Borrowers are also required to make certain mandatory repayments of the Term Loan from excess cash flow (as
defined in the Domestic Credit Agreement). The Term Loan may be prepaid in whole or part without penalty, other
than a 1.00% prepayment premium if the Borrowers enter into certain repricing transactions with respect to the Term
Loan within one year. The Term Loan is secured by the same collateral as the Revolving Facility on a pari passu
basis with the Revolving Facility, and is guaranteed by the same subsidiaries of the Company that guarantee the
Revolving Facility.
The Domestic Credit Agreement limits our ability to make restricted payments, including dividends and share
repurchases, subject to specified exceptions that are available if, in each case, no event of default under the credit
facility exists immediately before or after giving effect to the restricted payment. These include exceptions that
require that projected availability under the credit facility, as defined, is at least 15% and an exception that requires
that the restricted payment is funded from cash on hand and not from borrowings under the credit facility. The
Domestic Credit Agreement also imposes various other requirements, which take effect if availability falls below
designated thresholds, including a cash dominion requirement and a requirement that the fixed charge ratio at the
last day of any quarter be not less than 1.0 to 1.0.
At January 31, 2015 and February 1, 2014, we had $213 million and $1.3 billion, respectively, of Revolving
Facility borrowings and $667 million and $661 million, respectively, of letters of credit outstanding under the
Revolving Facility. Revolving Facility borrowings are included within Short-term borrowings on the Consolidated
Balance Sheets as we expect the borrowings to be repaid in less than 12 months. At January 31, 2015 and
February 1, 2014, the amount available to borrow under the Revolving Facility was $808 million and $549 million,
respectively, which reflects the effect of the springing fixed charge coverage ratio covenant and the borrowing base
limitation. The majority of the letters of credit outstanding are used to provide collateral for our insurance programs.
We had borrowings of $990 million and $1.0 billion at January 31, 2015 and February 1, 2014, respectively, under
the Term Loan.
Senior Secured Notes
In October 2010, we sold $1.0 billion aggregate principal amount of senior secured notes (the "Senior Secured
Notes"), which bear interest at 6 5/8% per annum and mature on October 15, 2018. Concurrent with the closing of
the sale of the Senior Secured Notes, the Company sold $250 million aggregate principal amount of Senior Secured
Notes to the Company’s domestic pension plan in a private placement, of which approximately $110 million remains
in the domestic pension plan. The Senior Secured Notes are guaranteed by certain subsidiaries of the Company and
are secured by a security interest in certain assets consisting primarily of domestic inventory and credit card
receivables (the "Collateral"). The lien that secures the Senior Secured Notes is junior in priority to the lien on such
assets that secures obligations under the Domestic Credit Agreement, as well as certain other first priority lien
obligations. The Company used the 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 Senior Secured
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 Senior Secured
Notes to be due and payable immediately. Generally, the Company is required to offer to repurchase all outstanding
Senior Secured 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 Senior Secured 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 Senior Secured 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 Senior Secured Notes held by nonaffiliates for a new issue of substantially identical notes registered
under the Securities Act of 1933, as amended.