Sears 2015 Annual Report Download - page 8

lender commitments. Rating agencies revise their ratings for the companies that they follow from time to time and
our ratings may be revised or withdrawn in their entirety at any time.
The Company's domestic revolving credit facility currently provides for up to $3.275 billion of lender
commitments, with the revolving commitments decreasing to $1.971 billion on April 8, 2016. Our ability to borrow
funds under this facility is limited by a borrowing base determined by the value, from time to time, of eligible
inventory, accounts receivable and certain other assets. In addition, our ability to incur possible second lien
indebtedness that is otherwise permitted under the domestic revolving credit facility is limited by a borrowing base
requirement under the indenture that governs our senior secured notes due 2018. If, through asset sales or other
means, the value of these eligible assets is not sufficient to support borrowings of up to the full amount of the
commitments under this facility, we will not have full access to the facility, but rather could have access to a lesser
amount determined by the borrowing base. Such a decline in the value of eligible assets also could result in our
inability to borrow up to the full amount of second lien indebtedness permitted by the domestic credit facility, but
rather we could be limited to borrowing a lesser amount determined by the borrowing base as calculated pursuant to
the terms of the indenture. The domestic revolving credit facility imposes various other requirements, which take
effect if availability falls below designated thresholds, including a cash dominion requirement. The domestic credit
facility also effectively limits full access to the facility if our fixed charge ratio at the last day of any quarter is less
than 1.0 to 1.0. As of January 30, 2016, our fixed charge ratio was less than 1.0 to 1.0. If availability under the
domestic revolving credit facility were to fall below 10%, the Company would be required to test the fixed charge
coverage ratio, and would not comply with the facility, and the lenders under the facility could demand immediate
payment in full of all amounts outstanding and terminate their obligations under the facility. In addition, the
domestic credit facility provides that in the event we make certain prepayments of indebtedness, for a period of one
year thereafter we must maintain availability under the facility of at least 12.5%. As a result of the Company's tender
offer for its Senior Secured Notes due 2018 consummated August 28, 2015, we are required to maintain 12.5%
availability under the domestic credit facility until August 28, 2016.
The lenders under our credit facilities may not be able to meet their commitments if they experience shortages
of capital and liquidity and there can be no assurance that our ability to otherwise access the credit markets will not
be adversely affected by changes in the financial markets and the global economy.
We cannot predict whether our plans to enhance our financial flexibility and liquidity to fund our
transformation will be successful.
We are continuing to pursue a transformation strategy and to explore potential initiatives to enhance our
financial flexibility and liquidity. We have incurred losses and experienced negative operating cash flows for the past
several years, and accordingly we have taken a number of actions to enhance our financial flexibility and fund our
continued transformation, including the amendment and extension or our revolving credit facility, the rights offering
and sale-leaseback transaction with Seritage Growth Properties, the senior secured term loan facility due 2018, the
separation of our Lands' End subsidiary, the Sears Canada rights offering, the rights offering for senior unsecured
notes with warrants, and various real estate transactions. In addition, on March 3, 2016, we announced our intention
to obtain a new senior secured term loan facility of up to $750 million under the accordion feature in our credit
facility (the "Incremental Term Loan"), which is currently being marketed to potential lenders and is uncommitted.
We also expect to pursue other near-term actions to bolster liquidity. If we continue to incur losses, additional
actions may be required to further enhance our financial flexibility and liquidity. The success of our initiatives is
subject to risks and uncertainties with respect to market conditions and other factors that may cause our actual
results, performance or achievements to differ materially from our plans. Our proposed Incremental Term Loan is
currently uncommitted, and there can be no assurance that the Incremental Term Loan or our other proposed
transactions to enhance financial flexibility, monetize assets, or other actions to generate liquidity will become
available on terms that are acceptable to us, on intended timetables or at all. In addition, there can be no assurance
that the evaluation and/or completion of any potential transactions will not have a negative impact on our other
businesses.
We cannot predict the outcome of the actions to generate liquidity to fund our transformation, whether such
actions would generate the expected liquidity to fund the transformation as currently planned or whether the costs of
such actions will be available on reasonable terms or at all. If we continue to experience operating losses, and we are
not able to generate enough funds from the above actions (or some combination of other actions), the availability
8