This Prospectus dated May 23, 1995
and Prospectus Supplement, dated
September 7, 1995, filed pursuant
to Rule 424(b)(5), relates to
Registration Statement No. 33-58139.
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MAY 23, 1995
$250,000,000
Sears Roebuck Acceptance Corp.
6-3/4% Notes due September 15, 2005
Interest on the Notes is payable on March 15 and September 15 of each year,
commencing on March 15, 1996. The Notes are not redeemable prior to
maturity. The Notes will be issued only in registered form in denominations
of $1,000 and integral multiples thereof. See ``Description of Notes''.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Initial Price Underwriting Proceeds to
to Public (1) Discount (2) Company (1)(3)
Per Note 99.927% 0.650% 99.277%
Total $249,817,500 $1,625,000 $248,192,500
(1) Plus accrued interest, if any, from September 12, 1995.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deduction of expenses payable by the Company, estimated to be
$137,500.
The Notes are offered severally by the Underwriters, as specified herein,
subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of the
Notes will be made in New York, New York, on or about September 12, 1995
against payment therefor in immediately available funds.
Goldman, Sachs & Co.
Merrill Lynch & Co.
J.P. Morgan Securities Inc.
Morgan Stanley & Co.
Incorporated
Salomon Brothers Inc
The date of this Prospectus Supplement is September 7, 1995.
No dealer, salesman or other person has been authorized to give any
information or to make any representation other than those contained or
incorporated by reference in this Prospectus Supplement or the Prospectus
and, if given or made, such information or representation must not be
relied upon as having been authorized. Neither this Prospectus Supplement
nor the Prospectus constitutes an offer to sell or the solicitation of an
offer to buy any securities other than the registered securities to which
it relates or an offer to sell or the solicitation of an offer to buy such
securities in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation in such jurisdiction. Neither the delivery of
this Prospectus Supplement or the Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been
no change in the affairs of the Company since the date hereof or that the
information is correct as of any time subsequent to its date.
TABLE OF CONTENTS
Prospectus Supplement
Page
Recent Financial Information S-3
Description of Notes S-4
Underwriting S-4
Legal Opinions S-5
Prospectus
Available Information 3
Reports to Holders of Debt Securities 3
Incorporation of Certain Documents by Reference 3
Sears Roebuck Acceptance Corp. 4
Use of Proceeds 4
Summary Financial Information 5
Ratio of Earnings to Fixed Charges 6
Description of Debt Securities 6
Plan of Distribution 9
Legal Opinion 10
Experts 10
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
RECENT FINANCIAL INFORMATION
The following table sets forth certain summary financial information of
Sears Roebuck Acceptance Corp. (the ``Company'') for the three- and
six-month periods ended June 30, 1995 and 1994. The summary information is
unaudited, but in the opinion of management, all adjustments (consisting
only of normal recurring accruals) necessary to present fairly the results
of operations of the Company have been included. The operating results for
the three- and six-month periods ended June 30, 1995 are not necessarily
indicative of results to be expected for the full year. The summary
information should be read in conjunction with the financial statements
incorporated in the Prospectus by reference.
Three Months Ended Six Months Ended
June 30 June 30
(Unaudited) (Unaudited)
1995 1994 1995 1994
(dollars in millions)
Operating Results
Total revenues $124.7 $57.1 $230.5 $108.2
Expenses
Interest and related expenses 99.3 45.2 183.5 85.5
Total Expenses 99.9 45.7 184.7 86.8
Income taxes 8.7 4.1 16.0 7.7
Net Income 16.1 7.3 29.8 13.7
Financial Position
Assets
Notes of Sears $7,154.3 $4,772.3
Customer receivables balances
purchased from Sears 89.5 73.0
Total assets 7,530.0 5,184.1
Liabilities
Debt payable within one year
Commercial paper 4,971.0 3,678.3
Agreements with bank trust
departments 144.0 98.1
Debentures and notes 1,199.0 250.0
Total liabilities 6,322.5 4,032.9
Sears, Roebuck and Co.
investment in SRAC
Capital stock (including capital
in excess of par value) 35.0 35.0
Retained income 1,172.5 1,116.2
Debt as percentage of equity 524% 350%
Other Pertinent Data
Contractual Credit Facilities
(quarter-end) 5,712.0 4,700.0
During the second quarter of 1995, the Company's revenues increased 118.0%
to $124.7 million from $57.1 million in the comparable 1994 period. For the
first six months of 1995, revenues were up 113% to $230.5 million from
$108.2 million for the comparable period in 1994. The increase in revenue
is attributable to both the increase in short-term interest rates and the
Company's higher average earning assets as a result of Sears, Roebuck and
Co.'s (``Sears'') increased funding requirements. In the second quarter of
1995, the average rate on earning assets was 6.69% compared to 4.77% in the
comparable 1994 period. In the first six months of 1995, the average rate
on earning assets was 6.59% compared to 4.68% in 1994. The Company's
average assets were $2.7 billion higher in the second quarter and $2.4
billion higher in the first half of 1995 when compared to the same periods
in 1994.
The Company's interest and related expenses increased 120% to $99.3 million
from $45.2 million and 115% to $183.5 million from $85.5 million for the
second quarter and first half of 1995, respectively, as compared to the
corresponding 1994 periods. The Company's cost of short-term funds averaged
6.25% in the second quarter and 6.20% in the first six months of 1995
compared to 4.11% and 3.80% for the same periods in 1994. The Company's
short-term borrowings averaged $5.3 billion and $5.0 billion for the second
quarter and first half of 1995, a 66% and 61% increase from the 1994 levels
of $3.2 billion and $3.1 billion.
The Company's net income of $16.1 million and $29.8 million for the second
quarter and first half of 1995, respectively, reflects increases of 121%
and 118% from the comparable 1994 period amounts of $7.3 million and $13.7
million.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the Prospectus as the ``Offered Debt Securities'')
supplements the description of the general terms and provisions of Debt
Securities set forth in the Prospectus, to which description reference is
hereby made.
The Notes are to be issued under an Indenture, dated as of May 15, 1995,
between the Company and The Chase Manhattan Bank, N.A., as Trustee.
The Notes will mature on September 15, 2005 and will be limited in
aggregate principal amount to $250,000,000. The Notes will be issued in
fully registered form only, in denominations of $1,000 and integral
multiples thereof. Each Note will bear interest at the rate per annum shown
on the cover page of this Prospectus Supplement from September 12, 1995, or
from the most recent Interest Payment Date to which interest has been paid
or provided for, payable semi-annually on March 15 and September 15 of each
year, commencing March 15, 1996, to the person in whose name the Note is
registered at the close of business on the March 1 or September 1,
respectively, next preceding such Interest Payment Date.
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement
dated the date hereof, the Underwriters named below have severally agreed
to purchase from the Company the respective principal amounts of Notes set
forth opposite their names in the table below:
Principal
Amount of
Underwriter Notes
Goldman, Sachs & Co. $50,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated 50,000,000
J.P. Morgan Securities Inc. 50,000,000
Morgan Stanley & Co. Incorporated 50,000,000
Salomon Brothers Inc 50,000,000
Total $250,000,000
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Notes are subject to
approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are committed to take and pay for all of the
Notes if any are taken.
The Company has been advised by the Underwriters that they propose to offer
part of the Notes directly to the public at the public offering price and
on the terms set forth on the cover page of this Prospectus Supplement and
part to certain dealers at a price that represents a concession not in
excess of 0.400% of the principal amount of the Notes. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of 0.250%
of the principal amount of the Notes to certain other dealers. After the
initial offering of the Notes, the offering price and other selling terms
may be varied by the Underwriters.
The Company does not intend to apply for listing of the Notes on a national
securities exchange, but has been advised by the Underwriters that they
presently intend to make a market in the Notes as permitted by applicable
laws and regulations. The Underwriters are not obligated, however, to make
a market in the Notes and any such market-making may be discontinued at any
time at the sole discretion of the Underwriters. Accordingly, no assurance
can be given as to the liquidity of, or trading market for, the Notes.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act of 1933.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may engage in the future in transactions with the Company
and its affiliates.
LEGAL OPINIONS
The legality of the Notes is being passed upon for the Company by Robert J.
Pence, Senior Counsel, Corporate Law, of Sears. At August 31, 1995, Mr.
Pence owned 413 Sears common shares, including shares credited to his
account in The Savings and Profit Sharing Fund of Sears Employees as of
July 31, 1995, and had options granted under Sears employee stock plans
relating to 3,920 Sears common shares. The legality of the Notes is being
passed upon for the Underwriters by Wachtell, Lipton, Rosen & Katz.
Wachtell, Lipton, Rosen & Katz from time to time performs legal services
for Sears.
Sears Roebuck Acceptance Corp.
Debt Securities
Sears Roebuck Acceptance Corp. (``SRAC'') from time to time may offer up to
$3,000,000,000 aggregate initial offering price of its debt securities
consisting of debentures, notes and/or other unsecured evidences of
indebtedness (the ``Debt Securities''). If so provided in the accompanying
Prospectus Supplement, the Debt Securities of any series may be represented
in whole or in part by one or more Global Securities (``Global
Securities'') registered in the name of a depository's nominee and, if so
represented, beneficial interests in such Global Securities will be shown
on, and transfers thereof will be effected only through, records maintained
by the depository and its participants. The Debt Securities may be offered
as separate series in amounts, at prices and on terms to be set forth in
supplements to this Prospectus. It is anticipated that SRAC will sell Debt
Securities directly to institutional investors and may sell Debt Securities
to or through underwriters, and also may sell Debt Securities directly to
other purchasers or through agents. See ``Plan of Distribution.'' The
accompanying Prospectus Supplement or Prospectus Supplements (the
``Prospectus Supplement'') sets forth the names of any underwriters or
agents involved in the sale of the Debt Securities in respect of which this
Prospectus is being delivered, the principal amounts, if any, to be
purchased by underwriters and the compensation, if any, of such
underwriters or agents.
The terms of the Debt Securities, including, where applicable, the specific
designation, aggregate principal amount, denominations, maturity, premium,
if any, rate (which may be fixed or variable) and time of payment of
interest, if any, terms for redemption at the option of SRAC or the Holder,
terms for sinking fund payments, the initial public offering price, the
names of, and the principal amounts, if any, to be purchased by
underwriters and the compensation of such underwriters, deferred pricing
arrangements, if any, and the other terms in connection with the offering
and sale of the Debt Securities in respect of which this Prospectus is
being delivered, are set forth in the accompanying Prospectus Supplement.
As used herein, Debt Securities shall include securities denominated in
U.S. dollars or, at the option of SRAC if so specified in the applicable
Prospectus Supplement, in any other currency or in composite currencies or
in amounts determined by reference to an index.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
May 23, 1995
No dealer, salesman or other person has been authorized to give any
information or to make any representation other than those contained or
incorporated by reference in this Prospectus and, if given or made, such
information or representation must not be relied upon as having been
authorized. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the registered
securities to which it relates or an offer to sell or the solicitation of
an offer to buy such securities in any jurisdiction to any person to whom
it is unlawful to make such offer or solicitation in such jurisdiction.
Neither the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or that the
information is correct as of any time subsequent to its date.
TABLE OF CONTENTS
Page
Available Information 3
Reports to Holders of Debt Securities 3
Incorporation of Certain Documents by Reference 3
Sears Roebuck Acceptance Corp. 4
Use of Proceeds 4
Summary Financial Information 5
Ratio of Earnings to Fixed Charges 6
Description of Debt Securities 6
Plan of Distribution 9
Legal Opinion 10
Experts 10
AVAILABLE INFORMATION
SRAC and Sears, Roebuck and Co. (``Sears''), SRAC's parent, are subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended (the ``Exchange Act'') and in accordance therewith file reports and
other information with the Securities and Exchange Commission (the
``Commission''). Sears also files proxy statements with the Commission.
Such reports, proxy statements and other information can be inspected and
copied at the public reference facilities of the Commission in Room 1024,
450 Fifth Street N.W., Washington, D.C. 20549; 7 World Trade Center, 13th
Floor, New York, New York 10048; and Suite 1400, Northwestern Atrium
Center, 500 W. Madison Street, Chicago, Illinois 60606; and copies of such
materials can be obtained from the public reference section of the
Commission at 450 Fifth Street N.W., Washington, D.C. 20549, at prescribed
rates. Reports, proxy statements and other information concerning Sears can
also be inspected at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005, the Chicago Stock Exchange
Incorporated, 440 South LaSalle Street, Chicago, Illinois 60605, and the
Pacific Stock Exchange, Inc., 301 Pine Street, San Francisco, California
94104.
Additional information regarding SRAC, Sears and the Debt Securities is
contained in the Registration Statement and the exhibits relating thereto,
filed with the Commission under the Securities Act of 1933, as amended (the
``Act''). For further information pertaining to SRAC, Sears and the Debt
Securities, reference is made to the Registration Statement, and the
exhibits thereto, which may be inspected without charge at the office of
the Commission at 450 Fifth Street N.W., Washington, D.C. 20549, and copies
thereof may be obtained from the Commission at prescribed rates.
REPORTS TO HOLDERS OF DEBT SECURITIES
Holders of Debt Securities will receive annual reports containing
information, including financial information that has been audited and
reported on by independent public accountants, about SRAC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Annual Reports on Form 10-K for the year ended December 31, 1994 and
the Quarterly Reports on Form 10-Q for the quarterly period ended March 31
and April 1, 1995, respectively, filed by SRAC and Sears, and the Current
Reports on Form 8-K for January 17, February 7, April 20, April 25 and May
15, 1995 filed by Sears, with the Commission pursuant to Section 13 of the
Exchange Act, and the proxy statement dated February 21, 1995 relating to a
Special Meeting of Shareholders, held on March 31, 1995 to consider and
vote on a proposal that provides for the distribution to the holders of
Sears common shares of all of the common stock of The Allstate Corporation
that are owned by Sears, filed by Sears with the Commission pursuant to
Section 14 of the Exchange Act, are incorporated in and made a part of this
Prospectus by reference.
All documents filed by SRAC or Sears with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the termination of the offering of the
Debt Securities (other than those portions of such documents described in
paragraphs (i), (k) and (l) of Item 402 of Regulation S-K promulgated by
the Commission) shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such
documents.
SRAC will provide without charge to each person to whom a copy of this
Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference (not
including exhibits to such documents unless such exhibits are specifically
incorporated by reference in such documents). Written or telephone requests
for such copies should be directed to Sears Roebuck Acceptance Corp., 3711
Kennett Pike, Greenville, Delaware 19807, Attention: Vice President,
Finance (302/888-3100).
SEARS ROEBUCK ACCEPTANCE CORP.
SRAC is a wholly-owned subsidiary of Sears and was incorporated in 1956
under the laws of Delaware. Its general offices are located at 3711 Kennett
Pike, Greenville Delaware 19807 (302/888-3100). SRAC raises funds primarily
from the direct placement of commercial paper with corporate and
institutional investors and through intermediate-term loans. SRAC uses
borrowing proceeds to acquire short-term notes of Sears and purchase
outstanding customer receivable balances from Sears. Sears, which is a
multi-line retailer that conducts Domestic and International merchandising
operations, uses the funds obtained from SRAC for general funding purposes.
SRAC, and not Sears, will be the sole obligor on the Debt Securities.
SRAC's income is derived primarily from the earnings on its investment in
the notes and receivable balances of Sears. The interest rate on Sears
notes is presently calculated so that SRAC maintains an earnings to fixed
charge ratio of at least 1.25 times. The yield on the investment in Sears
notes is related to SRAC's borrowing costs and, as a result, SRAC's
earnings fluctuate in response to movements in interest rates and changes
in Sears short-term borrowing requirements. Subject to the provisions of
the Indenture relating to the Debt Securities, SRAC will be required to
maintain a ratio of earnings to fixed charges of not less than 1.10 for any
fiscal quarter and cause Sears to maintain ownership of all voting stock of
SRAC as long as any Debt Securities are outstanding, and Sears has agreed
to pay SRAC such amounts as may be necessary for such purpose. See
``Description of Debt Securities.''
At April 30, 1995, SRAC had eleven employees.
USE OF PROCEEDS
The net proceeds to be received by SRAC from the sale of the Debt
Securities offered hereby will be added to its general funds and initially
used to reduce short-term indebtedness. As indicated under ``Sears Roebuck
Acceptance Corp.,'' SRAC's principal business is the purchase of short-term
notes of Sears; also, on occasion, SRAC purchases customer receivable
balances from Sears Merchandise Group's Domestic credit operations. SRAC
expects to incur additional indebtedness, but the amount and nature thereof
have not yet been determined and will depend on economic conditions and
certain capital requirements of Sears. It is anticipated that Sears and its
subsidiaries will continue their practice of short-term borrowing and will,
from time to time, incur additional long-term debt and engage in
securitization programs in which credit card receivables are sold in public
or private transactions. Sears also may, from time to time, issue equity
securities.
SUMMARY FINANCIAL INFORMATION
The following table sets forth certain summary financial information of
SRAC for the five years ended December 31, 1994. The summary information
should be read in conjunction with the financial statements of SRAC and the
notes thereto incorporated herein by reference.
1994 1993 1992 1991 1990
(dollars in millions)
Operating Results
Total revenues $282.7 $337.5 $696.5 $1,100.8 $1,347.4
Expenses
Interest and related
expenses 218.5 236.1 482.8 825.9 1,072.1
Total Expenses 220.4 276.7 532.3 894.1 1,077.2
Income taxes 22.1 21.3 56.1 70.3 91.8
Net income 40.2 39.5 108.1 136.4 178.4
Financial Position
Assets
Notes of Sears $6,842.5 $3,403.9 $10,493.6 $12,214.5 $14,578.2
Customer receivable
balances purchased
from Sears 81.5 88.0 963.4 1,042.8 -
Total assets 7,031.2 4,145.8 12,415.2 14,676.2 15,373.3
Liabilities
Debt payable within
one year
Commercial paper $4,912.9 $2,475.0 $8,515.3 $10,205.8 $10,331.0
Agreements with bank
trust departments 87.4 139.8 397.9 510.1 571.9
Debentures and notes 845.0 - - 204.0 925.0
Loan agreements with
SOFNV - 379.8 332.1 683.2 590.7
Total liabilities 5,853.5 3,008.3 9,287.0 11,656.1 12,489.6
Sears, Roebuck and Co.
investment in SRAC
Capital stock
(including capital
in excess of
par value) 35.0 35.0 365.2 365.2 365.2
Retained income 1,142.7 1,102.5 2,763.0 2,654.9 2,518.5
Debt as percentage of
equity 496% 263% 296% 384% 431%
Other Pertinent Data
Commercial paper
Average daily
outstandings 3,615 3,812 9,328 10,543 10,340
Agreements with bank
trust departments
Average daily
outstandings 124 402 747 643 848
Contractual Credit
Facilities (year-end) 5,132 4,200 10,812 11,801 10,775
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for SRAC for each of the years ended
December 31, 1994, 1993, 1992, 1991 and 1990 was 1.29, 1.26, 1.34, 1.25 and
1.25, respectively, and for the three-month period ended March 31, 1995 was
1.25. Earnings consist of net income plus fixed charges and income taxes.
Fixed charges consist of interest costs and amortization of debt discount
and expense; rental expense is insignificant with no effect on the
calculation. The interest rate paid by Sears to SRAC on its investment in
Sears notes is presently calculated to produce earnings sufficient to cover
SRAC's fixed charges at least 1.25 times.
The ratio of income to fixed charges for Sears and its consolidated
subsidiaries for each of the years ended December 31, 1994, 1993, 1991 and
1990 was 2.06, 1.66, 1.16 and 0.96, respectively, and for the three- and
twelve-month periods ended April 1, 1995 was 1.56 and 2.05, respectively.
For the year ended December 31, 1992, earnings did not cover fixed charges
by $2,869 million. In the computation of the ratio of income to fixed
charges for Sears and its consolidated subsidiaries, income consists of
income from continuing operations less undistributed net income of
unconsolidated subsidiaries plus fixed charges (excluding capitalized
interest) and federal and state income taxes. Fixed charges consist of
interest costs plus the portion of operating lease rentals which is
estimated to represent the interest element in such rentals.
DESCRIPTION OF DEBT SECURITIES
The following descriptions of the terms of the Debt Securities set forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt
Securities offered by any Prospectus Supplement (the ``Offered Debt
Securities'') and the extent, if any, to which such general provisions may
apply to the Debt Securities so offered will be described in the Prospectus
Supplement relating to such Offered Debt Securities.
The Debt Securities are to be issued under one of the Indentures (each, an
``Indenture'') referred to in the following sentence, a copy of the form of
which has been filed as an exhibit to the Registration Statement. SRAC may
enter into an Indenture with The Chase Manhattan Bank, N.A., as Trustee, or
with one or more other Trustees eligible to act as Trustee under an
Indenture pursuant to the Trust Indenture Act of 1939, as amended (each, a
``Trustee''). The particular Indenture under which any series of Debt
Securities is to be issued, and the identity of the Trustee under such
Indenture, will be identified in the Prospectus Supplement relating to such
series of Debt Securities. The following summaries of certain provisions of
the Debt Securities and the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all the
provisions of the Indenture, including the definitions therein of certain
terms. Whenever particular provisions or defined terms in the Indenture are
referred to herein, such provisions or defined terms are incorporated by
reference.
General
The Debt Securities will be unsecured obligations of SRAC.
The Indenture does not limit the amount of Debt Securities that may be
issued thereunder and provides that Debt Securities may be issued
thereunder from time to time in one or more series.
Reference is made to the Prospectus Supplement relating to the particular
series of Offered Debt Securities offered thereby for the following terms
of the Offered Debt Securities: (i) the title of the Offered Debt
Securities; (ii) any limit on the aggregate principal amount of the Offered
Debt Securities; (iii) the date or dates on which the Offered Debt
Securities will mature; (iv) the price (expressed as a percentage of the
aggregate principal amount thereof) at which the Offered Debt Securities
will be issued; (v) the rate or rates (which may be fixed or variable) per
annum at which the Offered Debt Securities will bear interest, if any; (vi)
the date from which such interest, if any, on the Offered Debt Securities
will accrue, the dates on which such interest, if any, will be payable, the
date on which payment of such interest, if any, will commence and the
Regular Record Dates for such Interest Payment Dates, if any; (vii) the
date or dates, if any, after or on which and the price or prices at which
the Offered Debt Securities may, pursuant to any optional or mandatory
redemption, conversion or exchange provisions, be redeemed, converted or
exchanged at the option of SRAC or of the Holder thereof and the other
detailed terms and provisions of such optional or mandatory redemption;
(viii) any subordination provisions; (ix) the dates, if any, on which and
the price or prices at which the Offered Debt Securities will, pursuant to
any mandatory sinking fund provisions, or may, pursuant to any optional
sinking fund provisions, be redeemed by SRAC, and the other detailed terms
and provisions of such sinking fund; (x) if other than the principal amount
thereof, the amount of Offered Debt Securities which shall be payable upon
declaration of acceleration of the Maturity thereof; (xi) the terms of any
warrants attached to the Offered Debt Securities; (xii) the currency or
currencies, including European Currency Units or other composite
currencies, in which Offered Debt Securities may be purchased and in which
principal, premium, if any, and interest, if any, on the Offered Debt
Securities will be payable; (xiii) any index used to determine the amount
of payments of principal, premium, if any, and interest, if any, on the
Offered Debt Securities; (xiv) whether the Offered Debt Securities are
issuable in whole or in part as one or more Global Securities and, in such
case, the name of the Depository for such Global Security or Global
Securities; (xv) the place or places, if other than as set forth in the
Indenture, where the principal, premium, if any, and interest, if any, on
the Offered Debt Securities will be payable; and (xvi) any other terms
relating to the Offered Debt Securities not inconsistent with the Indenture
but which may modify or delete any provision of the Indenture insofar as it
applies to such series; provided that no term thereof shall be modified or
deleted if imposed under the Trust Indenture Act and that any modification
or deletion of the rights, duties or immunities of the Trustee shall have
been consented to in writing by the Trustee.
Principal, premium, if any, and interest, if any, will be payable, and the
Debt Securities (other than Debt Securities represented by Global
Securities) will be transferable, at the office or agency of SRAC
maintained for such purposes in the Borough of Manhattan of The City of New
York, and at such other places, if any, in the city in which the principal
executive offices of SRAC or the city in which the principal corporate
trust office of the Trustee are located, as SRAC may designate, which,
except as otherwise specified in the Prospectus Supplement relating to a
particular series of Offered Debt Securities, will initially include the
principal corporate trust office of the Trustee in the Borough of Manhattan
of The City of New York and the principal executive offices of SRAC in
Greenville, Delaware. Unless other arrangements are made, interest on the
Debt Securities (other than Debt Securities represented by Global
Securities) will be paid by checks mailed to the Holders at their
registered addresses. (Sections 1.1, 2.5, 3.1, 3.2) Information with
respect to payment of principal, premium, if any, and interest, if any, on,
and transfers of beneficial interests in, Debt Securities represented by
Global Securities will be set forth in the Prospectus Supplement relating
thereto.
If the principal, premium, if any, and interest, if any, will be payable in
a currency other than U.S. dollars, including European Currency Units or
another composite currency, and such currency is not available for payment
due to the imposition of exchange controls or other circumstances beyond
the control of SRAC, SRAC shall satisfy its payment obligations in U.S.
dollars on the basis of the Market Exchange Rate for such currency on the
latest date for which such rate was established on or before the date on
which payment is due. (Section 2.12)
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Debt Securities will be issued only in fully registered form, without
coupons, in denominations of $1,000 or any integral multiple thereof. No
service charge will be made for any registration of transfer or exchange of
the Offered Debt Securities, but SRAC may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith. (Sections 2.2, 2.5)
Debt Securities may be issued under the Indenture as Original Issue
Discount Securities to be offered and sold at a substantial discount below
their stated principal amount. Federal income tax consequences and other
special considerations applicable to any such Original Issue Discount
Securities will be described in the Prospectus Supplement relating thereto.
``Original Issue Discount Security'' means any security which provides for
an amount less than the principal amount thereof to be due and payable upon
the declaration of acceleration of the Maturity thereof upon the occurrence
of a default and the continuation thereof. (Sections 1.1, 6.1)
Certain Restrictions
The Indenture provides that SRAC will maintain a Fixed Charge Coverage
Ratio for any fiscal quarter of not less than 1.10 and that SRAC will cause
Sears to maintain ownership of all the voting stock of SRAC. ``Fixed Charge
Coverage Ratio'' means SRAC's ratio of earnings to fixed charges determined
in accordance with Item 503(d) of Regulation S-K promulgated by the
Commission, as in effect on the date of the Indenture. Pursuant to a letter
agreement between SRAC and Sears (the ``Fixed Charge Coverage and Ownership
Agreement''), Sears has agreed, for the benefit of holders of outstanding
Debt Securities, that, (i) as long as SRAC is so required to maintain such
Fixed Charge Coverage Ratio, Sears will pay SRAC such amounts which,
together with any other earnings available therefore, are sufficient for
SRAC to maintain such Fixed Charge Coverage Ratio and (ii) as long as SRAC
is so required to cause Sears to maintain such ownership, Sears will
maintain ownership of SRAC. The Indenture provides that SRAC (i) will cause
Sears to observe and perform in all material respects all covenants or
agreements of Sears contained in the Fixed Charge Coverage and Ownership
Agreement and (ii) will not amend, waive, terminate or otherwise modify any
provision of the Fixed Charge Coverage and Ownership Agreement. (Sections
1.1, 3.6) These restrictions would not necessarily prevent a highly
leveraged transaction involving SRAC or Sears. Except as may otherwise be
provided in the accompanying Prospectus Supplement, there are no other
provisions of the Debt Securities which are designed to afford protection
in the event of a highly leveraged transaction involving SRAC or Sears.
Defaults
The following are defaults with respect to any series of Debt Securities:
(a) failure to pay the principal amount (and premium, if any) on such
series when due and payable; (b) failure to pay any interest on such series
when due, continued for 30 days (unless the entire amount of such payment
is deposited by SRAC with the Trustee or with a paying agent prior to the
expiration of 30 days); (c) failure to perform any other covenant of SRAC
in the Indenture (other than a covenant included in the Indenture solely
for the benefit of any series of Debt Securities other than that series),
continued for 60 days after written notice; (d) acceleration of
$100,000,000 or more in principal amount of indebtedness for borrowed money
of SRAC (including acceleration with respect to Debt Securities other than
that series) or Sears under the terms of the instrument under which such
indebtedness is issued or secured (including the Indenture), if such
indebtedness shall not have been discharged or such acceleration is not
annulled within 30 days after written notice or prior to the time principal
owed on the outstanding Debt Securities of that series shall be declared
due and payable, except as a result of compliance with applicable laws,
orders or decrees; and (e) certain events of bankruptcy, insolvency, or
reorganization. In addition, a particular series of Debt Securities may
provide for additional events of default, as may be described in the
Prospectus Supplement. If a default shall occur and be continuing with
respect to any series of Debt Securities, the Trustee or the Holders of a
majority in principal amount of the outstanding Debt Securities of that
series may declare the principal amount of such series (or, if the Debt
Securities of that series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of that
series) due and payable immediately, which declaration may, in certain
instances, be annulled by the Holders of a majority of the principal amount
of outstanding Debt Securities of that series. In the case of such
declaration, there would become due and payable such principal amount plus
any accrued interest or other periodic payments. (Section 6.1)
No Holder of any Debt Security of any series will have any right to
institute any proceeding with respect to the Indenture or for any remedy
thereunder, unless such Holder previously shall have given to the Trustee
written notice of a default and unless also the Holders of a majority of
the principal amount of outstanding Debt Securities of that series shall
have made written request upon the Trustee, offering reasonable indemnity,
to institute such proceeding as Trustee, and the Trustee shall have
neglected or refused to institute such proceeding within a reasonable time.
However, the right of any Holder of any Debt Security of that series to
enforce the payment of principal and interest on such Debt Security, on or
after the due dates expressed in such Debt Security, may not be impaired or
affected. (Section 6.7)
SRAC is required to furnish annually to the Trustee statements as to the
performance or fulfillment of its covenants, agreements or conditions in
the Indenture and as to the absence of default. (Section 3.4)
Modification or Amendment of the Indenture
Modifications and alterations of the Indenture may be made by SRAC with the
consent of the Holders of a majority of the aggregate principal amount of
the outstanding Debt Securities of each series affected by the modification
or alteration, provided that no such change shall be made without the
consent of the Holders of each Debt Security then outstanding affected
thereby which will (a) permit the extension of the time of payment of any
payment on any such Debt Security, or a reduction in any such payment or
(b) reduce the above-stated percentage of Holders of any series of Debt
Securities whose consent is required to modify or alter the Indenture.
(Article XI)
Defeasance
Unless otherwise provided for in the accompanying Prospectus Supplement,
SRAC may discharge the Indenture with respect to Debt Securities of any
series (except for certain obligations to register the transfer or exchange
of Debt Securities of such series, replace mutilated, destroyed, lost and
stolen Debt Securities of such series, maintain paying agencies and hold
moneys for payment in trust) upon the deposit with the Trustee or a paying
agent, in trust, of (1) money in an amount sufficient, or (2) U.S.
Government Obligations (if the Debt Securities are denominated in U.S.
dollars) or Eligible Obligations (if the Debt Securities are denominated in
a Foreign Currency) which through the payment of interest and principal in
respect thereof in accordance with their terms will provide money in an
amount sufficient, or (3) any combination thereof in an amount sufficient,
to pay the principal, premium, if any, and each installment of interest on
the Debt Securities of such series on the dates such payments are due in
accordance with the terms of the Indenture and such Debt Securities. Such a
trust may only be established if, among other things, SRAC has received a
ruling from the Internal Revenue Service or an opinion of recognized
counsel who is not an employee of SRAC, in either case to the effect that,
among other things, the Holders of the Debt Securities of such series will
not recognize income, gain or loss for federal income tax purposes as a
result of such deposit and defeasance of the Indenture and will be subject
to federal income tax on the same amount and in the same manner and at the
same times, as would have been the case if such deposit and defeasance had
not occurred. Notwithstanding such deposit, the obligations of SRAC under
the Indenture to pay interest and principal shall remain in full force and
effect until the Debt Securities of such series have been paid in full.
(Section 13.4)
If and when a ruling from the Internal Revenue Service or an opinion of
recognized counsel can be provided without reliance upon the continuation
of SRAC's obligations regarding the payment of interest and principal, then
such obligations of SRAC shall cease upon delivery to the Trustee of such
ruling or opinion and compliance with the other conditions precedent
provided for in the Indenture. Under present ruling positions of the
Internal Revenue Service, such a ruling is not obtainable. (Section 13.4)
Regarding the Trustee
The Chase Manhattan Bank, N.A., which SRAC anticipates will be the Trustee
under an Indenture, performs other services for SRAC.
PLAN OF DISTRIBUTION
General. SRAC may sell Debt Securities to or through underwriters, and
also may sell Debt Securities directly to other purchasers or through
agents. It is anticipated that SRAC will offer Debt Securities directly to
brokers or dealers, investment companies, insurance companies, banks,
savings and loan associations, trust companies or similar institutions, and
trusts for which a bank, savings and loan association, trust company or
investment adviser is the trustee or authorized to make investment
decisions.
The distribution of the Debt Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The
Prospectus Supplement will describe the method of distribution of the
Offered Debt Securities.
In connection with the sale of Debt Securities, underwriters may receive
compensation from SRAC or from purchasers of Debt Securities for whom they
may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Debt Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers
for whom they may act as agent. Underwriters, dealers and agents that
participate in the distribution of Debt Securities may be deemed to be
underwriters, and any discounts or commissions received by them and any
profit on the resale of Debt Securities by them may be deemed to be
underwriting discounts and commissions, under the Act. Any such underwriter
or agent will be identified, and any such compensation will be described,
in the Prospectus Supplement.
Under agreements which may be entered into by SRAC, underwriters, dealers
and agents who participate in the distribution of Debt Securities may be
entitled to indemnification by SRAC against certain liabilities, including
liabilities under the Act.
Delayed Delivery Arrangements. If so indicated in the Prospectus
Supplement, SRAC will authorize dealers or other persons acting as SRAC
agents to solicit offers by certain institutions to purchase Debt
Securities from SRAC pursuant to contracts providing for payment and
delivery on a future date. Institutions with which such contracts may be
made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and
others, but in all cases such institutions must be approved by SRAC. The
obligations of any purchaser under any such contract will not be subject to
any conditions except that (i) the purchase of the Offered Debt Securities
shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject, and (ii) if the Offered
Debt Securities are also being sold to underwriters, SRAC shall have sold
to such underwriters the Offered Debt Securities not sold for delayed
delivery. The dealers and such other persons will not have any
responsibility in respect of the validity or performance of such contracts.
Deferred Pricing Arrangements. The Prospectus Supplement relating to an
issue of Debt Securities will disclose any deferred pricing arrangement
between SRAC and any entity acting as an underwriter which would permit
SRAC to determine its ultimate cost of funds pertaining to such Debt
Securities at a later date through certain transactions indexed to U.S.
Treasury securities. Any such arrangement would be made pursuant to a
deferred pricing agreement signed simultaneously with the pricing agreement
which supplements the underwriting agreement. The deferred pricing
agreement would contain the formula used to determine any post-closing
purchase price adjustments.
LEGAL OPINION
The legality of the Debt Securities is being passed upon for SRAC by Robert
J. Pence, Senior Counsel, Corporate Law Department, of Sears. At April 15,
1995, Mr. Pence owned 411 Sears common shares, including shares credited to
his account in The Savings and Profit Sharing Fund of Sears Employees as of
March 31, 1995, and had options granted under the Sears employees stock
plans relating to 1,980 shares.
EXPERTS
The financial statements and Summary Financial Information incorporated by
reference and included in this prospectus, respectively, have been audited
by Deloitte & Touche LLP, independent certified public accountants, as
stated in their reports incorporated by reference herein (which reports
express unqualified opinions and, with respect to Sears and consolidated
subsidiaries, includes an explanatory paragraph referring to Sears and
consolidated subsidiaries changing its method of accounting for
postretirement benefits in 1992), and with respect to the Summary Financial
Information has been included as Exhibit 99 to the Registration Statement.
Such financial statements and Summary Financial Information have been
incorporated by reference and included herein, respectively, in the
Registration Statement in reliance upon the reports of such firm and given
upon their authority as experts in accounting and auditing.
With respect to the unaudited interim financial information which is
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their reports included in the
Quarterly Reports on Form 10-Q for the quarters ended March 31 and April 1,
1995 for SRAC and Sears, respectively and incorporated by reference herein,
they did not audit and they did not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their reports
on such information should be restricted in light of the limited nature of
the review procedures applied. Deloitte & Touche LLP are not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
reports on the unaudited interim financial information because those
reports are not ``reports'' or a ``part'' of the registration statement
prepared or certified by an accountant within the meaning of Sections 7 and
11 of the Act.
Sears Roebuck
Acceptance Corp.
$250,000,000
6-3/4% Notes due September 15, 2005
PROSPECTUS SUPPLEMENT
Goldman, Sachs & Co.
Merrill Lynch & Co.
J.P. Morgan Securities Inc.
Morgan Stanley & Co.
Incorporated
Salomon Brothers Inc
September 7, 1995
