Sears 2015 Annual Report Download - page 74

unused amounts of the Revolving Facility at a rate, depending on facility usage, between 0.375% to 0.625%, per
annum, with a minimum of 0.50% applicable to commitments under the extended tranche. From and after April 8,
2016, such commitment fees with respect to the extended tranche will change to a flat 0.50%.
The Revolving Facility is in place as a funding source for general corporate purposes and is secured by a first
lien on substantially all of our domestic inventory and credit card and pharmacy receivables, and is subject to a
borrowing base formula to determine availability. The Revolving Facility is guaranteed by all domestic subsidiaries
of Holdings that own inventory or credit card or pharmacy receivables. The Revolving Facility also permits
aggregate second lien indebtedness of up to $2.0 billion, of which $302 million in second lien notes were
outstanding at January 30, 2016, resulting in $1.7 billion 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 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%. Currently,
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. Additionally, the Borrowers are required to make certain mandatory
repayments of the Term Loan from excess cash flow (as defined in the Amended Domestic Credit Agreement). The
Term Loan may be prepaid in whole or part without penalty. 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. At January 30, 2016 and January€31, 2015, respectively, we had
borrowings of $980 million and $990 million under the Term Loan, and carrying value, net of the remaining
discount and debt issuance costs, of $968 million and $973 million.
The Amended 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%, exceptions that may be
subject to certain maximum amounts and an exception that requires that the restricted payment is funded from cash
on hand and not from borrowings under the credit facility. Further, the Amended Domestic Credit Agreement
includes customary covenants that restrict our ability to make dispositions, prepay debt, and make investments,
subject, in each case, to various exceptions. The Amended 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 30, 2016 and January€31, 2015, we had $797 million and $213 million, respectively, of Revolving
Facility borrowings and $652 million and $667 million, respectively, of letters of credit outstanding under the
Revolving Facility. At January 30, 2016 and January€31, 2015, the amount available to borrow under the Revolving
Facility was $316 million and $808 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.
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 none 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 Amended 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
SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
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