As part of its ongoing efforts to return to profitability US retail giant Sears Holdings Corp has struck a deal to extend the maturity of its existing term loan.
Originally due to mature in June 2018, the agreement has seen the maturity extended to January 2019, with the option to further extend the maturity to July 2019
During the fourth quarter, Sears paid down the Term Loan by U$325m, reducing the outstanding balance to about $400m and bringing its total repayment during 2017 to about $570m.
Meanwhile, Sears says it intends to obtain a new secured credit facility in connection with the agreement reached with the Pension Benefit Guaranty Corporation (PBGC) on 7 November, that provides for the release of 138 of its properties from a ring-fence arrangement with the PGBC.
The new facility is expected to be secured by such properties and consist of an about $407m (net of associated costs) first lien tranche and a second lien tranche of up to $200m. Sears says it intends to use the net proceeds to fund the payment of about $407m into the Sears pension plans and for general corporate purposes.
Following the funding, Sears will be relieved of the obligation to make further contributions to the pension plans for about two years, other than a $20m supplemental payment due in the second quarter of 2018. The company 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,” says CFO Rob Riecker.”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.”
The completion of the secured credit facility is subject to obtaining lender commitments, as well as market and other conditions.
Last week, an investor in Sears called for the embattled retailer to consider its options – including going private – amid 24 straight quarters of sales declines.
Despite narrowing its net loss to US$558m in the third quarter, Sears saw net sales slip to $3.7bn, compared with revenues of $5.bn in the third quarter.