Sears extends LoC facility, amends secured term loan, mezzanine loan

By Marisa Wong

Morgantown, W.Va., April 23 – Sears Holdings Corp. entered into a sixth amendment on April 20 to its letter-of-credit agreement dated Dec. 28, 2016 to extend the maturity of the $271 million commitment under the existing facility to Dec. 28, 2019 from Dec. 28, 2018.

Sears Roebuck Acceptance Corp. and Kmart Corp. are borrowers under the letter-of-credit facility. JPP, LLC and JPP II, LLC are lenders, with Citibank, NA as administrative agent and issuing bank. Edward S. Lampert, Sears’ chief executive officer and chairman, is the sole stockholder, chief executive officer and director of ESL Investments, Inc., which controls JPP and JPP II.

To secure their obligation to participate in letters of credit issued under the facility, the lenders are required to maintain cash collateral on deposit with Citibank in an amount equal to 102% of the commitments under the facility, and in connection with the maturity extension, the borrowers paid the lenders an upfront fee equal to 0.5% of the aggregate amount of the lender deposit.

The amendment also requires the borrowers to pay a fee equal to 0.5% of the aggregate amount of the lender deposit in connection with the termination of the facility, whether at maturity or otherwise, or with any reduction in the amount of the lenders’ commitments.

Also on April 20, Sears entered into a first amendment to its credit agreement dated March 14 with UBS AG, Stamford Branch, LLC as administrative agent and UBS Securities LLC as lead arranger and bookrunner.

SRC OP LLC, SRC Facilities LLC and SRC Real Estate (TX), LLC are borrowers under the secured term loan. As of April 20, the aggregate principal amount of the secured loan was $118.7 million.

The amendment modifies some provisions of the credit agreement governing the incurrence of additional mezzanine loans, including by increasing the loan-to-value cap applicable to the aggregate principal amount of the secured loan, the company’s mezzanine loan and additional mezzanine loans to 55% from 50% and removing a requirement that the additional mezzanine loans not exceed an amount equal to the principal amount of the secured loan repaid by the borrowers.

No upfront or other fees were paid in connection with the term loan amendment.

Sears also entered into on April 20 a second amendment to its mezzanine loan agreement dated March 14 with JPP and JPP II as lenders and JPP as administrative agent.

SRC Sparrow 2 LLC is borrower under the mezzanine loan agreement, which provides for a term loan secured by a pledge of the equity interests in SRC OP.

The loan agreement contains an uncommitted accordion feature that allows the borrower to incur additional loans. The amendment makes changes to some provisions of the loan agreement governing the incurrence of additional mezzanine loans to conform those provisions to the corresponding provisions in the secured term loan agreement.

No upfront or other fees were paid in connection with the mezzanine loan amendment.

In connection with the entry into the mezzanine amendment, SRC Sparrow 2 borrowed $72.2 million as an additional mezzanine loan. This brings the aggregate principal amount of loans outstanding under the mezzanine agreement to $378.9 million.

Sears is a Hoffman Estates, Ill.-based retailer.

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