HOFFMAN ESTATES -- Sears Holdings Corp., the unprofitable retailer controlled by Edward Lampert, is seeking a term loan of as much as $1 billion to pay down borrowings under a revolving credit line.
A meeting with lenders to discuss the loan, which would mature in June 2018, is scheduled for Sept. 18, according to a person with knowledge of the transaction who wasn't authorized to speak publicly and asked not to be identified.
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The term loan would be issued under an existing credit pact that provides Sears with a $3.275 billion asset-based revolving credit line, the retailer said today in a statement distributed PR Newswire. The Hoffman Estates, Illinois-based company has about $1.1 billion available under the revolver, according to data compiled by Bloomberg.
"Recent operating results were disappointing and don't bode well heading into the important second half back-to-school and holiday season," Evan Mann, an analyst at Gimme Credit LLC, wrote in a note today. "We look for credit ratios to deteriorate."
Sears's net loss in the three months ended Aug. 3 widened to $194 million from a deficit of $132 million a year earlier as loyalty program members used more discounts and appliance sales fell.
Sears pays an interest rate of 2 percentage points to 2.5 percentage points more than the London interbank offered rate for advances under its revolver, depending upon how much debt the company holds relative to its earnings, according to an Aug. 22 regulatory filing.
The retailer's $987.4 million of 6.625 percent notes due in October 2018 traded at 97 cents on the dollar at 1:24 p.m. New York time, up from 96.5 cents on Sept. 12, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Under a revolver, money can be borrowed again once it's repaid; in a term loan, it can't.