Sears Holdings, Inc.’s $300 Million Debtor-in-possession Credit Facility


Choate represented Wells Fargo as Co-Collateral Agent and joint underwriter on the transaction

Sears Holdings Corporation (NASDAQ: SHLD) executed a series of actions to position the Company to establish a sustainable capital structure, continue streamlining its operating model and grow profitably for the long term. To facilitate these actions, the Company and certain of its subsidiaries have filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York (the “Court”).

The Company expects to move through the restructuring process as expeditiously as possible and is committed to pursuing a plan of reorganization in the very near term as it continues negotiations with major stakeholders started prior to today’s announcement.

Holdings has received commitments for $300 million in senior priming debtor-in-possession (“DIP”) financing from its senior secured asset-based revolving lenders and is negotiating a $300 million subordinated DIP financing with ESL Investments, Inc. (“ESL”). ESL is the Company’s largest stockholder and creditor, and Edward S. Lampert is ESL’s Chairman and Chief Executive Officer. Subject to Court approval, the DIP financing is expected to improve the Company’s financial position immediately and support its operations during the financial restructuring process.

Holdings has filed a number of customary motions with the Court seeking authorization to support its operations during the restructuring process and ensure a smooth transition into Chapter 11. The Company intends to continue payment of employee wages and benefits, honor member programs, and pay vendors and suppliers in the ordinary course for all goods and services provided on or after the filing date.

The Company’s Sears and Kmart stores, and its online and mobile platforms, are open and continue to offer a full range of products and services to members and customers. Holdings’ services and brand businesses will also continue to operate as usual. Customers should expect Holdings’ loyalty programs, including the Shop Your Way membership program, and the Sears and private label credit card rewards programs, to continue as normal. The Company is committed to working with its vendors and other partners to help maintain inventory levels and ensure timely product delivery.

Choate represented Wells Fargo as Co-Collateral Agent and joint underwriter in connection with the debtor-in-possession credit facility with a team including Kevin J. Simard (Picture) and John F. Ventola.

Involved fees earner: Kevin Simard – Choate; John Ventola – Choate;

Law Firms: Choate;

Clients: Wells Fargo;

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Author: Ambrogio Visconti