Item 1.01.
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Entry into a Material Definitive Agreement.
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Entry into Second Amendment to Credit Agreement
On June 29, 2018, Sears Holdings Corporation (the Company), through SRC O.P. LLC, SRC Facilities LLC and SRC Real Estate (TX), LLC
(collectively, the Secured Loan Borrowers), entities wholly-owned and controlled indirectly by the Company, entered into a Second Amendment (the Credit Agreement Amendment) to the Credit Agreement, dated as of March 14,
2018 (the Credit Agreement), among the Secured Loan Borrowers, the lenders party thereto, UBS AG, Stamford Branch, LLC, as administrative agent, and UBS Securities LLC, as lead arranger and bookrunner. The Credit Agreement provides for a
term loan (the Secured Loan) that is secured by the Secured Loan Borrowers interests in certain real properties. As of June 29, 2018, the aggregate principal amount of the Secured Loan was $71.1 million.
The Credit Agreement Amendment increased the
loan-to-value
cap applicable to
the aggregate principal amount of the Secured Loan, the Mezzanine Loan (as defined below) and the Additional Mezzanine Loans (as defined below) that may be incurred under the Credit Agreement and the Mezzanine Loan Agreement (as defined below) from
55% to 69%. No upfront or other fees were paid by the Secured Loan Borrowers in connection with the Credit Agreement Amendment.
The foregoing description
of the Credit Agreement Amendment does not purport to be complete and is qualified in its entirety by reference to the Credit Agreement Amendment, a copy of which is filed herewith as Exhibit 10.1 and is incorporated by reference herein.
Entry into Fifth Amendment to Mezzanine Loan Agreement
On June 29, 2018, the Company, through SRC Sparrow 2 LLC (the Mezzanine Loan Borrower), an entity wholly-owned and controlled indirectly by
the Company, entered into a Fifth Amendment (the Mezzanine Loan Amendment) to the Mezzanine Loan Agreement, dated as of March 14, 2018 (the Mezzanine Loan Agreement), among the Mezzanine Loan Borrower, JPP, LLC and JPP
II, LLC, as lenders, and JPP, LLC, as administrative agent. Mr. Edward S. Lampert, the Companys Chief Executive Officer and Chairman, is the sole stockholder, chief executive officer and director of ESL Investments, Inc., which
controls JPP, LLC and JPP II, LLC. The Mezzanine Loan Agreement provides for a term loan (the Mezzanine Loan) that is secured by a pledge of the equity interests in SRC O.P. LLC, the direct parent company of the entities that own the
real properties that secure the obligations of the Secured Loan Borrowers under the Credit Agreement.
The Mezzanine Loan Agreement contains an
uncommitted accordion feature pursuant to which the Mezzanine Loan Borrower may incur additional loans (Additional Mezzanine Loans), subject to certain conditions set forth in the Mezzanine Loan Agreement and the Credit Agreement. The
Mezzanine Loan Amendment made a conforming change to the
loan-to-value
cap to increase such cap from 55% to 69%. No upfront or other fees were paid by the Mezzanine Loan
Borrower in connection with the Mezzanine Loan Amendment.
In connection with the entry into the Mezzanine Loan Amendment, the Mezzanine Borrower borrowed
$50.0 million as an Additional Mezzanine Loan under the Mezzanine Loan Agreement. As of June 29, 2018, after giving effect to such borrowing, the aggregate principal amount of the Mezzanine Loan and Additional Mezzanine Loans outstanding
under the Mezzanine Loan Agreement was $438.2 million.
The foregoing description of the Mezzanine Loan Amendment does not purport to be complete and
is qualified in its entirety by reference to the Mezzanine Loan Amendment, a copy of which is filed herewith as Exhibit 10.2 and is incorporated by reference herein.
Entry into Fifth Amendment to Second Lien Credit Agreement
On July 5, 2018, the Company and the other parties thereto entered into a Fifth Amendment (the Second Lien Credit Agreement Amendment) to that
certain Second Lien Credit Agreement (as previously amended, amended and restated, supplemented or otherwise modified, the Second Lien Credit Agreement), dated as of September 1, 2016, among the Company, Sears Roebuck Acceptance
Corp. (SRAC), Kmart Corporation (Kmart), the lenders party thereto, and JPP, LLC, as administrative agent and collateral administrator. The Second Lien Credit Agreement Amendment provides for the incurrence by the Company of
approximately $45 million of alternative tranche line of credit loans (the New Loans) in exchange for a like principal amount of the Companys outstanding 6 5/8% Senior Secured Notes due 2018 (the Old Notes), which
Old Notes were cancelled.
The New Loans mature on October 15, 2018, which was the same maturity date of the Old Notes. Amounts
outstanding under the New Loans may be prepaid at any time, subject to a make-whole prepayment premium.
The New Loans bear interest at a rate equal to 6
5/8% per annum, which was the same rate as the Old Notes. Interest on the New Loans is payable from April 15, 2018 on the maturity date of the New Loans.
The New Loans otherwise generally have similar terms to the existing loans under the Second Lien Credit Agreement; provided that the lenders under the New
Loans benefit from certain additional covenants. The New Loans are guaranteed by SRAC, Kmart and the other subsidiaries of the Company that guarantee the existing loans under the Second Lien Credit Agreement and are secured by the same assets of the
Company and its subsidiaries that secure the existing loans under the Second Lien Credit Agreement.
The foregoing summary of the Second Lien Credit
Agreement Amendment and the New Loans does not purport to be complete and is qualified in its entirety by reference to the full text of the Second Lien Credit Agreement Amendment, a copy of which is filed herewith as Exhibit 10.3 and is
incorporated by reference herein.