Sears Holdings Corp. (SHLD) Goes for a $1.0 Billion Senior Secured Loan Term Facility

Sears Holdings Corporation (NASDAQ:SHLD) has announced today their intention to borrow $1.0 billion in order to refinance existing debt. The firm would obtain a term loan issued under the Existing Credit Agreement, which provides Sears Holdings Corporation (NASDAQ:SHLD) with a $3.275 billion asset-based revolving credit line. The company has already drawn $2.2 billion of the revolving loan –-a type of debt where money repaid can be borrowed again—and has still $1.1 billion available. This loan is due to mature in April 2016.

A meeting with the lenders of the leader retailer is allegedly scheduled for September 18^th. There, they will discuss the definitive possibility of replacing the existing revolving loan by a secured term one. The company expects it to be secured by the same collateral as the revolving credit facility and mature in June 2018, as stated by Bloomberg.

Bulls believe that the company still has potential to generate cash flow, as it has in the past years, using the money to buy back shares and pay out debts. A case has been also made on its significant assets on real estate –it owns over 2,000 stores in North America. Sears Holdings Corporation (NASDAQ:SHLD) has also engaged in a transition to online sales and to becoming a membership company. Through its SHOP YOUR WAY™ initiative, it has been reshaping the way it interacts with their customers and members.

Although a marginal improvement is believed to be possible in 2013-2014, growth forecasts aren’t very encouraging for Sears Holdings Corporation (NASDAQ:SHLD). Last month the company posted a $194 million second-quarter loss and the 26th consecutive quarter of sales decline. After its merger with Kmart in 2005, the firm has been unable to produce top-line growth for eight years in a row.

Sears Holdings Corporation (NASDAQ:SHLD) has been suffering from the economic downturn disproportionately. A bearish bet on this company may be likely to succeed, as sales seem to be declining faster than the management’s ability to cut down costs and reduce inventory. As competition in hard-goods and soft-goods remains intense, their business will continue to be affected. Surprisingly, the development of online sales might pose a further throwback, as appliance sales continue to fall and loyalty program members increase their use of discounts.

Disclosure: Pamela Gaviño holds no position in any stocks mentioned

Recommended Reading:

Macy’s, Inc. (M), Target Corporation (TGT): There’s No Holiday Cheer in Sears Holdings Corporation (SHLD)’ Early Christmas Push

Hedge Fund Highlights: Dan Loeb, Paulson & Co, Sears Holdings Corporation (SHLD)

Simon Property Group Inc (SPG), General Growth Properties Inc (GGP): Sears Holdings Corp (SHLD)’s Incredible Hidden Value