Sears Holdings – Seeks Approval of Junior Secured Term Loan Facility of $350 million from GACP Finance, Terms Vary Significantly from Earlier ESL Proposal

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November 14, 2018 – Sears Holdings filed with the Court of a term sheet detailing a $350 million debtor-in-possession (“DIP”) multiple draw term loan facility (the GACP Junior DIP Facility”) to be provided by Great American Capital Partners Finance (“GACP”) to Sears Roebuck Acceptance Corp. and Kmart Corp. and certain of their affiliates [Docket No. 735].  GACP is affiliated with liquidation specialist Great American Group and financial services firm B. Riley Financial Inc. 

In its motion for DIP financing filed with the Court on October 15, 2018 [Docket No. 7], the Debtors announced that they had made substantial progress on a term sheet for a $300 million junior DIP term loan and that affiliates of Edward Lampert’s ESL Investment, Inc. (“ESL”) and Cyrus Capital Partners LP had each indicated an interest in providing a portion of that junior DIP financing (the “ESL Junior DIP Financing”). Neither of these parties is a signatory of the term sheet, ie a “DIP Lender,” although the term sheet does allow for GACP to assign debt issued under its proposed DIP facility. The GACP Junior DIP Facility interest rate of LIBOR+11.5% is higher than that noted in a summary of terms filed in respect of the earlier proposed ESL Junior Financing (LIBOR+9.5%) and includes a 3% closing fee that was not part of the ESL Junior Financing.

The GACP Junior DIP Facility term sheet notes the following key terms, “A secured debtor-in-possession multiple draw term loan facility up to $350.0 million (the “GACP Junior DIP Facility” and the loans thereunder, the ‘DIP Loans’), to be made available to the Borrowers by the DIP Lenders after the DIP Facility Approval Date in accordance with the Budget and the final DIP documentation; provided, however, that (i) no more than $250.0 million aggregate principal amount of the DIP Loans (the ‘Interim DIP Loans’) shall be funded by the DIP Lenders prior to the Final Closing Date, which Interim DIP Loans shall be funded in three draws on and after the Initial Closing Date in the following amounts: the first draw of $75.0 million on the Initial Closing Date, the second draw of $75.0 million and the third draw of $100.0 million, in the cases of the second and third draws, on dates when the Excess Availability is less than $50.0 million and (ii) no more than $100.0 million aggregate principal amount of the DIP Loans (the ‘Subsequent DIP Loans’) shall be funded by the DIP Lenders, which Subsequent DIP Loans shall be funded in multiple draws of amounts to be agreed on dates when the sum of Excess Availability and the Obligors’ available cash is less than $50.0 million. Closing Fee is 3.00%, (i) due and payable with respect to the full $200.0 million aggregate principal amount of the Interim DIP Loans, on the Initial Closing Date and (ii) due and payable with respect to the aggregate principal amount of unused commitments under the GACP Junior DIP Facility prior to the Final Closing Date upon the earliest to occur of (x) December 31, 2018 and (y) the Final Closing Date….Pricing/Floor: LIBOR+11.50%, payable monthly….Extension Fee is 1.25%, earned on the first day of the extension, but payment is deferred until the Maturity Date. Undrawn Fee is 0.75%.”

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