Sears Holdings Corporation – Agent for Senior Lending Facility Objects to Sale of Real Property, Citing Concerns with Use of Proceeds

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December 20, 2018 – SL Agent objected [Docket No. 1357] to the Debtors’ motion for the sale of property [Docket No. 938]. SL Agent is the agent for the Debtors’ Third Amended and Restated Loan Agreement, dated as of June 4, 2018 (the “Loan Agreement,” which had $831.4mn outstanding as of the Petition date). The Loan Agreement provides that borrowings are secured by, among other things, a portfolio of real estate assets subject to mortgages in favor of SL Agent for the benefit of the lenders (the “Collateral”). On November 29, 2018, the Debtors filed a sale motion seeking Court approval of the sale of certain real property to Amerco Real Estate Company (“Amerco”), including six properties that are part of the Collateral (the “Sale”) for approximately $28.2mn. 

As we previously reported in respect of the sale motion, on November 29, 2018, the Debtors requested Court authority (i) for the sale of thirteen  parcels of non-residential real property (the “Real Property,” comprised of 12 K-Mart stores and 1 Sears store) and (ii) for the assumption and assignment of certain unexpired leases of the Debtors in connection with the sale of those 13 properties to Amerco for $62 million. 

The objection states, “SL Agent does not object to the sale of the Collateral pursuant to the Sale Motion or the proposed price allocation for the Collateral. However, SL Agent has not consented to the Debtors’ use of Collateral proceeds contemplated by the Proposed Sale Order, and is not otherwise adequately protected for such use. Accordingly, SL Agent files this limited objection to request that such Collateral proceeds be either used to repay Note A or held in a segregated account pending further order of this Court.”

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