Sears Holdings entered into an agreement to extend the maturity of its existing term loan, which originally was to mature in June 2018, to January 2019, with the option to further extend the maturity to July 2019.
According to a related 8-K filing, Bank of America was administrative agent for the transaction, and Bank of America Merrill Lynch was the arranger.
During Q4/17, the company paid down the term loan by $325 million, reducing the outstanding balance to approximately $400 million and bringing the total term loan repayment during 2017 to approximately $570 million.
Sears Holdings also intends to obtain a new secured credit facility in connection with the agreement reached with the Pension Benefit Guaranty Corporation (PBGC) on November 7, 2017 which provides for the release of 138 of its properties from a ring-fence arrangement with the PGBC. The facility is expected to be secured by such properties and consist of an approximately $407 million first lien tranche and a second lien tranche of up to $200 million.
Holdings has retained UBS Investment Bank as its financial advisor for the secured credit facility.
The company intends to use the net proceeds from the secured credit facility to fund the payment of approximately $407 million into the Sears pension plans and for general corporate purposes. Following the funding of the $407 million pension contribution, Sears Holdings will be relieved of the obligation to make further contributions to the pension plans for approximately two years (other than a $20 million supplemental payment due in Q2/18).
Holdings expects to repay the secured credit facility over time with the proceeds from sales of the underlying properties.
“As indicated in our third quarter earnings announcement, we have taken further action to provide the company with additional financial flexibility as we enter 2018,” said Rob Riecker, Sears Holdings’ chief financial officer. “The extension of the term loan improves our short-term debt maturity profile, while the credit facility associated with the PBGC agreement will support our continued commitment to the company’s pension plans while enhancing our financial flexibility.
“Looking ahead, we continue to explore alternatives with respect to our debt maturities to meaningfully reduce cash interest payments and provide the company greater flexibility. In addition to the liquidity actions announced today, we remain focused on improving our performance by diversifying the company’s revenue streams through third-party partnerships for several of our businesses, developing new ways to leverage our innovative Shop Your Way platform to better invest marketing dollars at the member level and maintaining extreme cost discipline in light of continued headwinds across the retail sector.”