Sears Holdings Corporation announced that it has entered into an amendment to its existing Second Lien Credit Facility dated as of March 14, 2018, 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 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 and the Additional Mezzanine Loans that may be incurred under the Credit Agreement and the Mezzanine Loan Agreement from 55% to 69%. No upfront or other fees were paid by the Secured Loan Borrowers in connection with the Credit Agreement Amendment.
On June 29, 2018, the Company, through SRC Sparrow 2 LLC, an entity wholly-owned and controlled indirectly by the Company, entered into a Fifth Amendment to the Mezzanine Loan Agreement, dated as of March 14, 2018, among the Mezzanine Loan Borrower, JPP, LLC and JPP II, LLC, as lenders, and JPP, LLC, as administrative agent. Mr. Edward S. Lampert, the Company’s 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 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, 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.
Separately, on July 5, 2018, the Company and the other parties thereto entered into a Fifth Amendment to that certain 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 in exchange for a like principal amount of the Company’s outstanding 6 5/8% Senior Secured Notes due 2018, 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 come as Sears prepares to shutter even more stores than previously announced. On July 2 the retailer announced it was adding ten locationsto the list of outlets it had already announced it was closing. The stores include nine Sears outlets and one is a K-Mart, bringing the total number of stores slated to close this fall to 78.