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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 26, 1998
Sears Credit Account Master Trust II
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(Exact name of registrant as specified in charter)
Illinois 0-24776 Not Applicable
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(State of (Commission (IRS Employer
Organization) File Number) Identification No.)
c/o SRFG, Inc.
3711 Kennett Pike
Greenville, Delaware 19807
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (302) 888-3176
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Former name or former address, if changed since last report: Not Applicable
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The Exhibit Index appears on Page 4
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Item 5. Other Events
On October 26, 1998, the registrant made available to prospective
investors a series term sheet setting forth a description of the collateral
pool and the proposed structure of $425,000,000 aggregate principal amount of
Series 1998-2 Class A Master Trust Certificates of Sears Credit Account Master
Trust II. The Series Term Sheet is attached hereto as Exhibit 99.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Exhibit 99 Series Term Sheet dated October 26, 1998 of Sears Credit Account
Master Trust II, Series 1998-2.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Sears Credit Account Master Trust II
(Registrant)
By: SRFG, Inc.
(Originator of the Trust)
Date: October 26, 1998 By: /s/ George F. Slook
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George F. Slook
President and CEO
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EXHIBIT INDEX
Exhibit 99 Series Term Sheet dated October 26, 1998 of Sears Credit Account
Master Trust II, Series 1998-2
Page 4
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EXHIBIT 99
SUBJECT TO REVISION
SERIES TERM SHEET DATED OCTOBER 26, 1998
SEARS CREDIT ACCOUNT MASTER TRUST II
$425,000,000 ____% CLASS A MASTER TRUST CERTIFICATES, SERIES 1998-2
SEARS, ROEBUCK AND CO.
SERVICER
SRFG, INC.
SELLER
THE CERTIFICATES REPRESENT INTERESTS IN THE SEARS CREDIT ACCOUNT MASTER
TRUST II. THE CERTIFICATES ARE NOT OBLIGATIONS OF SEARS, ROEBUCK AND CO.,
SEARS NATIONAL BANK, SRFG, INC. OR ANY OF THEIR AFFILIATES. NEITHER THE
CERTIFICATES NOR THE UNDERLYING CREDIT ACCOUNTS OR RECEIVABLES ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY.
THIS SERIES TERM SHEET CONTAINS STRUCTURAL AND COLLATERAL INFORMATION
ABOUT THE CERTIFICATES; HOWEVER, THIS SERIES TERM SHEET DOES NOT CONTAIN
COMPLETE INFORMATION ABOUT THE CERTIFICATES. THE INFORMATION IN THIS SERIES
TERM SHEET IS PRELIMINARY AND WILL BE SUPERSEDED BY THE INFORMATION CONTAINED
IN THE PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THE PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS WILL CONTAIN ADDITIONAL INFORMATION NOT SET FORTH IN THIS SERIES
TERM SHEET. YOU SHOULD READ BOTH THE PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
THIS SERIES TERM SHEET IS NOT AN OFFER TO SELL ANY SECURITY, NOR IS IT A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY. SEARS AND SRFG MAY NOT OFFER OR
SELL THE CERTIFICATES IN ANY STATE WHERE THE OFFER OR SALE IS PROHIBITED.
SEARS AND SRFG MAY NOT SELL YOU ANY OF THE CERTIFICATES UNLESS YOU HAVE
RECEIVED BOTH THE PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
CREDIT SUISSE FIRST BOSTON
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
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This series term sheet will be superseded in its entirety by the information
appearing in the prospectus supplement, the prospectus and the Series 1998-2
Supplement to the Pooling and Servicing Agreement.
THE TRUST ..................... Sears Credit Account Master Trust II
THE CERTIFICATES .............. $425,000,000 ___% Class A Master Trust
Certificates, Series 1998-2.
SELLER RETAINED CERTIFICATES .. $30,000,000 Class B Master Trust Certificates,
Series 1998-2
$45,000,000 Class C Master Trust
Certificates, Series 1998-2
You may not purchase Class B or Class C
certificates in this offering.
INTEREST ON THE CERTIFICATES .. ____% per year.
The Trustee will calculate interest on the
Certificates on the basis of a 360-day year
of twelve 30-day months.
INTEREST PAYMENT DATES ....... The 15th day of each month (or, if not a
business day, the next business day) beginning
in December 1998.
PRINCIPAL PAYMENTS ........... The Trust is scheduled to pay Class A principal
in 24 equal monthly payments of $17,708,333 on
the 15th day of each month (or, if not a
business day, the next business day) beginning
in November 2002 and ending in October 2004.
CLASS A EXPECTED FINAL PAYMENT
DATE ........................ October 15, 2004 (or, if not a business day,
the next business day).
RECEIVABLES .................. The aggregate amount of receivables in the
accounts in the Trust as of the last day of the
Due Period ending in September 1998 was
$11,219,108,080 consisting of $11,032,536,786
of principal receivables and $186,571,294 of
finance charge receivables.
"Due Period" for any account is the period
included in the monthly billing cycle of
that account.
SUBORDINATION (CLASS A CREDIT
ENHANCEMENT) ................ The Class B certificates and the Class C
certificates will be subordinate to the
Certificates to the extent described in the
prospectus supplement. Subordination of the
Class B and Class C certificates provides
credit enhancement for the Certificates.
SERIES TERMINATION DATE ..... The business day after October 15, 2008 (or, if
October 15, 2008 is not a business day, the
second business day after October 15, 2008).
The "Series Termination Date" is the last day
on which the Trust will make payments on the
Certificates.
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ERISA CONSIDERATIONS ........ Under the regulations issued by the Department
of Labor, the Department of Labor will not deem
the Trust's assets "plan assets" of any employee
benefit plan that holds interests in the
Certificates if the Certificates meet the
requirements necessary to be considered
"publicly-offered securities." One of those
requirements is that upon completion of the
public offering, at least 100 persons
independent of SRFG and each other hold
interests in the Certificates. The Underwriters
expect, although they cannot assure you, that at
least 100 independent persons will hold
interests in the Certificates. SRFG expects
that the Certificates will meet the Department
of Labor's requirements for "publicly-offered
securities." If the Department of Labor deems
the Trust's assets to be "plan assets" of an
employee benefit plan, existing exemptions from
the "prohibited transaction" rules of the
Employee Retirement Income Security Act of 1974,
as amended, may not apply to all transactions
involving the Trust's assets. Accordingly,
employee benefit plans should consult their
counsel before purchasing Certificates.
CLASS A CERTIFICATE RATING .. The Trust will issue the Certificates only if at
least two nationally recognized rating agencies
rate the Certificates in the highest rating
category. The rating agencies base their
ratings primarily on the value of the
receivables in the Trust and the subordination
of the Class B certificates and the Class C
certificates.
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COMPOSITION AND HISTORICAL PERFORMANCE OF THE SEARS PORTFOLIO
The tables below describe the composition and historical performance of
the open-end charge plan accounts in the Sears Portfolio, excluding accounts
from Puerto Rico (which are not included in the Trust). These tables do not
reflect the composition and historical performance of the accounts in the
Trust. Sears uses different procedures to calculate the performance
characteristics of the accounts in the Sears Portfolio than those the Trust
uses to calculate the performance characteristics of the accounts in the Trust.
COMPOSITION OF THE SEARS PORTFOLIO
COMPOSITION OF ACCOUNTS BY CREDIT LIMIT
The accounts in the Sears Portfolio had the following distributions of
credit limits (1):
<TABLE>
<CAPTION>
PERCENTAGE OF SEARS
PORTFOLIO AS OF
BILLING CYCLES
ENDED IN
CREDIT LIMIT DECEMBER 1997
------------ --------------
<S> <C>
$ 0 - $ 99(2)............... 16.4%
100 - 499.................. 1.8%
500 - 999.................. 5.4%
1,000 - 1,499.................. 7.3%
1,500 - 1,999.................. 6.6%
2,000 - 2,999.................. 15.7%
3,000 - 3,999.................. 17.8%
4,000 and over................... 29.0%
--------------
100.0%
==============
</TABLE>
________________
(1) Sears based this information on accounts with balances at any time in the
twenty-four months ended with the billing cycles ended in December 1997.
(2) The Bank or Sears may impose zero credit limits (i) due to delinquency,
(ii) upon customer request, (iii) temporarily in the case of lost or
stolen credit cards or (iv) under certain circumstances in which the
customer's credit may be in question. The customer must obtain specific
approval from the Bank or Sears for purchases on an account with a zero
credit limit. In general, specific approval is automatic for accounts
with past due balances less than or equal to the scheduled minimum monthly
payment and automatically denied for accounts with past due balances
greater than or equal to two times the scheduled minimum monthly payment.
LARGEST STATES
The Sears Portfolio is not concentrated geographically. As of the billing
cycles ended in December 1997, the following five states had the largest
receivables balances and number of accounts:
<TABLE>
<CAPTION>
SEARS PORTFOLIO CALIFORNIA FLORIDA NEW YORK PENNSYLVANIA TEXAS
- --------------- ---------- ------- -------- ------------ -----
<S> <C> <C> <C> <C> <C>
% of active accounts 10.3% 6.9% 6.5% 6.0% 6.8%
% of balances....... 10.4% 7.5% 6.0% 5.4% 8.3%
</TABLE>
No other state accounted for more than 5% of the number of active accounts
in the Sears Portfolio or 5% of the balances as of the billing cycles ended in
December 1997.
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SEASONING
More than 54% of the accounts in the Sears Portfolio were at least five
years old as of the billing cycles ended in December 1997. The ages of
accounts in the Sears Portfolio were distributed as follows (1):
<TABLE>
<CAPTION>
PERCENTAGE OF SEARS
PORTFOLIO AS OF
BILLING CYCLES
ENDED IN
AGE OF ACCOUNTS DECEMBER 1997
--------------- -------------
<S> <C>
Up to 1 year........................... 7.8%
1 year up to 2 years................... 12.5%
2 years up to 3 years.................. 11.7%
3 years up to 4 years.................. 6.9%
4 years up to 5 years.................. 6.6%
5 years up to 10 years................. 16.6%
10 years and older..................... 37.9%
------------
100.0%
============
</TABLE>
(1) Sears based this information on accounts with balances at any time in the
twenty-four months ended with the billing cycles ended in December 1997.
SUMMARY YIELD INFORMATION
The accounts in the Sears Portfolio had the following annualized aggregate
monthly yields (1):
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Aggregate Monthly Yield 20.49% 20.72% 20.27% 18.67% 17.67%
</TABLE>
(1) Aggregate monthly yield is the average of monthly yields annualized for
each period shown. Sears calculates "monthly yield" by dividing:
- monthly finance charges and late fees minus the
estimated amount of finance charges and late fees billed to
accounts that were charged-off as uncollectible in that month,
by
- the balance outstanding as of the beginning of
the month.
SUMMARY CHARGE-OFF INFORMATION
The accounts in the Sears Portfolio had the following charge-off
percentages:
<TABLE>
<CAPTION>
THREE MONTH TWELVE MONTH
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross Charge-Offs as a % of balances (1)....... 8.75% 9.00% 7.61% 5.12% 3.88%
Recoveries as a % of balances (1).............. 1.42% 1.25% 1.06% 0.79% 0.72%
</TABLE>
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(1) All rates shown are unweighted averages of annualized monthly rates for
the indicated periods. The Servicer calculated the monthly rate by
dividing:
- - the amount of charged-off principal receivables or recoveries for that
month, by
- - the balance outstanding as of the beginning of the month.
The monthly charge-off rate does not reflect the estimated amount of
finance charges and late fees billed to accounts that Sears charged off as
uncollectible in that month. For a discussion of Sears change to a new
aging methodology in connection with the conversion of its receivables
processing system to the Total System Services, Inc. account processing
system, which will have an effect on gross charge-off levels, see the
Trust's Current Report on Form 8-K filed on May 14, 1998.
SUMMARY DELINQUENCY AGING INFORMATION
The accounts in the Sears Portfolio had the following delinquency profiles
(1):
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED
SEPTEMBER 30,
1998 1997 1996 1995
------------ ----- ----- -----
<S> <C> <C> <C> <C>
Delinquencies as a % of balances (2)
60-89 days past due................. 2.02% 1.96% 1.66% 1.34%
90-119 days past due................ 1.55% 1.45% 1.16% 0.89%
120 days or more past due........... 3.44% 2.97% 2.18% 1.64%
------------ ----- ----- -----
Total Delinquencies 7.01% 6.38% 5.00% 3.87%
============ ===== ===== =====
</TABLE>
_______________
(1) In general, Sears and the Bank consider an account delinquent when its
cumulative past due balance is three or more times the scheduled minimum
monthly payment. Sears divides delinquencies as of the end of each month
by balances at the beginning of that month. For a discussion of Sears
change to a new aging methodology in connection with the conversion of its
receivables processing system to the Total System Services, Inc. account
processing system, which will have an effect on reported delinquency
levels, see the Trust's Current Report on Form 8-K filed on May 14, 1998.
(2) Represents the percentage of account balances for which the cumulative
past due amount is three, four, and five or more times, respectively, the
scheduled minimum monthly payment.
SUMMARY PAYMENT RATE INFORMATION
The accounts in the Sears Portfolio had the following monthly payment
rates (1):
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED
SEPTEMBER 30,
PAYMENT RATES 1998 1997 1996 1995
- ------------- ------------ ----- ----- -----
<S> <C> <C> <C> <C>
Average Monthly Rate.............. 6.40% 6.14% 6.29% 6.50%
Highest Monthly Rate.............. 6.89% 6.64% 6.83% 7.11%
Lowest Monthly Rate............... 5.81% 5.81% 5.86% 6.14%
</TABLE>
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______________
(1) Sears calculates the payment rate by dividing:
- cash received during each group of billing cycles, by
- the balance outstanding as of the beginning of those cycles.
Prior to April 1998 Sears reduced "cash received" by the amount of late
fee assessments; Sears has eliminated that reduction.
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