Sears 2014 Annual Report Download - page 83

SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
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The Lender sold certain participating interests in the Loan during the third quarter, which may restrict the
Lender’s ability to take certain actions with respect to the Loan without consent of the purchasers of such
participating interests, including the waiver of certain defaults under the Loan.
At January 31, 2015, the outstanding balance of the Loan was $400 million. On February 25, 2015, we entered
into an agreement effective February 28, 2015, to amend and extend the $400 million secured short-term loan.
Under the terms of the amendment, we repaid $200 million of the $400 million on March 2, 2015 and, in connection
with this repayment, the Lender agreed to release at the Company's option, one half of the value of the pledged
collateral. The maturity date of the Loan was extended until the earlier of June 1, 2015, or the receipt by the
Company of the sale proceeds pursuant to the potential REIT transaction. At any time prior to maturity of the Loan,
Borrowers may make a one-time election to re-borrow up to $200 million from the Lender (the "Delayed Advance"),
subject to certain conditions, including payment to the Lender of a fee equal to 0.25% of the principal amount of the
Delayed Advance. In the event the Company elects to re-borrow the Delayed Advance, Borrowers would again grant
a lien on the released properties to secure the Loan.
Domestic Credit Agreement
During the first quarter of 2011, 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 January 31, 2015, 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
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