In an effort to improve its financial position, Sears Holdings has reached agreements to extend a portion of its secured loan facility and annuitize its pension obligations.
The deal, officially agreed to on May 22, allows the company to repay $100 million of its $500 million 2016 secured loan facility at its original maturity this July and to extend the remainder of the loan until January 2018. The agreement also gives Sears Holdings the option to further extend the maturity of the loan for an additional six months to July 2018
Entities affiliated with JPP, LLC and JPP II, LLC, and Cascade Investment, L.L.C. are the lenders under the loan facility. JPP and JPP II are entities affiliated with ESL Investments, which is owned by Edward Lampert, chairman and CEO of Sears Holdings.
In addition, on May 15, 2017, the company entered into an agreement to annuitize $515 million of pension liability with Metropolitan Life Insurance Company, under which Metropolitan will pay future pension benefit payments to approximately 51,000 retirees.
According to the company, this action is expected to have an immaterial impact on the funded status of its total pension obligations but will serve to reduce the size of the company’s combined pension plan, future cost volatility and plan administrative expenses.
Sears officials said the company is targeting a reduction in its outstanding debt and pension obligations of $1.5 billion for fiscal 2017 through improving profitability, asset sales and working capital management.
