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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): March 11, 1999
Sears Credit Account Master Trust II
--------------------------------------------------
(Exact name of registrant as specified in charter)
Illinois 0-24776 Not Applicable
-------- ------- --------------
(State of (Commission (IRS Employer
Organization) File Number) Identification No.)
c/o SRFG, Inc.
3711 Kennett Pike
Greenville, Delaware 19807
- ---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (302) 888-3176
--------------
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 March 11, 1999, the registrant made available to prospective
investors a series term sheet setting forth a description of the collateral pool
and the proposed structure of $500,000,000 aggregate principal amount of Series
1999-1 Class A Master Trust Certificates and $35,300,000 aggregate principal
amount of Series 1999-1 Class B Master Trust Certificates of Sears Credit
Account Master Trust II. The Series Term Sheet is attached hereto as Exhibit
99. Subsequently, the registrant made available to prospective investors a
revised series term sheet to clarify certain information contained in the
Series Term Sheet attached hereto as Exhibit 99. The registrant will file such
revised series term sheet as an exhibit to a subsequent Form 8-K. Investors
should review the revised series term sheet instead of the Series Term Sheet
attached hereto as Exhibit 99.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Exhibit 99 Series Term Sheet dated March 11, 1999 of Sears Credit Account
Master Trust II, Series 1999-1.
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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: March 11, 1999 By: /s/ Larry R. Raymond
--------------------------
Larry R. Raymond
Vice President, Finance
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EXHIBIT INDEX
Exhibit 99 Series Term Sheet dated March 11, 1999 of Sears Credit Account
Master Trust II, Series 1999-1
Page 4
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EXHIBIT 99
SUBJECT TO REVISION
SERIES TERM SHEET DATED MARCH 11, 1999
SEARS CREDIT ACCOUNT MASTER TRUST II
$500,000,000 ____% CLASS A MASTER TRUST CERTIFICATES, SERIES 1999-1
$35,300,000 _____% CLASS B MASTER TRUST CERTIFICATES, SERIES 1999-1
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.
UNDERWRITERS OF THE CLASS A CERTIFICATES
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
<PAGE> 2
This series term sheet will be superseded in its entirety by the information
appearing in the prospectus supplement, the prospectus and the Series 1999-1
Supplement to the Pooling and Servicing Agreement.
<TABLE>
<CAPTION>
<S> <C>
THE TRUST................................. Sears Credit Account Master Trust II.
THE CERTIFICATES.......................... $500,000,000 ___% Class A Master
Trust Certificates, Series 1999-1.
$35,300,000 ___% Class B Master Trust
Certificates, Series 1999-1. SRFG
reserves the right to retain the
Class B certificates.
SELLER RETAINED CERTIFICATES.............. $52,950,000 Class C Master Trust
Certificates, Series 1999-1. The
Class C certificates will be retained
by SRFG and therefore you may not
purchase Class C certificates in this
offering.
INTEREST ON THE CERTIFICATES.............. Class A Certificates: ____% per year.
Class B 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 April 1999.
PRINCIPAL PAYMENTS........................ The Trust is scheduled to pay Class A
principal in 24 equal monthly
payments of $20,833,333.34 on the
15th day of each month (or, if not a
business day, the next business day)
beginning in April 2003 and ending in
March 2005.
The Trust is scheduled to pay Class B
principal in 2 equal monthly payments
of $17,650,000.00 on April 15, 2005
(or, if not a business day, the next
business day) and May 15, 2005 (or,
if not a business day, the next
business day).
CLASS A EXPECTED FINAL PAYMENT DATE....... March 15, 2005 (or, if not a business
day, the next business day).
CLASS B EXPECTED FINAL PAYMENT DATE....... May 15, 2005 (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 January 1999 was $11,149,628,362
consisting of $10,965,902,540 of
principal receivables and
$183,725,822 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 Class A
certificates to the extent described
in the prospectus supplement.
Subordination of the Class B
certificates and Class C certificates
provides credit enhancement for the
Class A certificates.
</TABLE>
2
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<TABLE>
<CAPTION>
<S> <C>
SUBORDINATION (CLASS B CREDIT
ENHANCEMENT).............................. The Class C certificates will be
subordinate to the Class B
certificates to the extent described
in the prospectus supplement.
Subordination of the Class C
certificates provides credit
enhancement for the Class B
certificates.
SERIES TERMINATION DATE................... The business day after March 15, 2009
(or, if March 15, 2009 is not a
business day, the second business day
after March 15, 2009). The "Series
Termination Date" is the last day on
which the Trust will make payments on
the Certificates.
ERISA CONSIDERATIONS...................... Under the regulations issued by the
Department of Labor, the Trust's
assets will not be considered "plan
assets" of any employee benefit plan
that holds interests in the Class A
certificates if the Class A
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 Class A
certificates. The Class A
Underwriters expect, although they
cannot assure you, that at least 100
independent persons will hold
interests in the Class A
certificates. SRFG also expects that
the other requirements will be met so
that the Class A certificates will be
considered "publicly-offered
securities." If, however, the Class
A certificates do not meet the
requirements of a "publicly offered
security" and the Trust's assets are
considered to be "plan assets" of an
employee benefit plan, then the
"prohibited transaction" rules of the
Employee Retirement Income Security
Act of 1974, as amended, may apply to
certain transactions involving the
Trust's assets. We do not expect
that 100 or more independent persons
will hold interests in the Class B
certificates. Accordingly, employee
benefit plans should consult their
counsel before purchasing
Certificates.
CLASS A CERTIFICATE RATING................ The Trust will issue the Class A
certificates only if at least two
nationally recognized rating agencies
rate the Class A 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.
CLASS B CERTIFICATE RATING................ Unless SRFG retains the Class B
certificates, the Trust will issue
the Class B certificates only if at
least two nationally recognized
rating agencies rate the Class B
certificates in one of the three
highest rating categories. The
rating agencies base their ratings
primarily on the value of the
receivables in the Trust and the
subordination of the Class C
certificates.
</TABLE>
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COMPOSITION AND HISTORICAL PERFORMANCE OF THE SEARS PORTFOLIO
The tables below describe the composition and historical performance of the
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
methodologies 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 1998
------------ -------------
<S> <C>
$ 0 - $ 99 (2)............... 18.1%
100 - 499................... 2.8%
500 - 999................... 5.4%
1,000 - 1,499................... 6.8%
1,500 - 1,999................... 6.1%
2,000 - 2,999................... 14.0%
3,000 - 3,999................... 18.1%
4,000 and over................... 28.7%
------
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 1998.
(2) Sears National 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. Sears is in the process of converting its
receivables processing system to the Total System Services, Inc. ("TSYS")
account processing system. In general, for accounts processed on Sears
existing receivables processing system, specific approval is automatic for
accounts with past due balances less than two times 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. For accounts converted to the new TSYS processing system,
specific approval is automatic for accounts that are current or for which
the customer has failed to make a required payment only in the last
billing cycle, and automatically denied for accounts for which the
customer has failed to make a required payment in each of the last two or
more billing cycles.
LARGEST STATES
The Sears Portfolio is not concentrated geographically. As of the billing
cycles ended in December 1998, 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....... 10.5% 6.9% 6.5% 5.9% 6.7%
% of balances.............. 10.6% 7.4% 6.1% 5.2% 8.2%
</TABLE>
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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 1998.
SEASONING
More than 57% of the accounts in the Sears Portfolio were at least five years
old as of the billing cycles ended in December 1998. The ages of accounts in
the Sears Portfolio were distributed as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF SEARS
PORTFOLIO AS OF BILLING
CYCLES ENDED IN
AGE OF ACCOUNTS DECEMBER 1998
--------------- -------------
<S> <C>
Up to 1 year................................. 7.6%
1 year up to 2 years......................... 8.4%
2 years up to 3 years........................ 12.5%
3 years up to 4 years........................ 8.7%
4 years up to 5 years........................ 6.2%
5 years up to 10 years....................... 18.5%
10 years and older........................... 38.1%
------
100.0%
======
</TABLE>
Sears based this information on accounts with balances at any time in the
twenty-four months ended with the billing cycles ended in December 1998.
SUMMARY YIELD INFORMATION
The accounts in the Sears Portfolio had the following annualized aggregate
monthly yields:
<TABLE>
<CAPTION>
THREE TWELVE
MONTHS ENDED MONTHS ENDED
JANUARY 31, 1999 JANUARY 31, 1999 1998 1997 1996
---------------- ---------------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Aggregate Monthly Yield............ 19.78% 20.38% 20.48% 20.27% 18.67%
</TABLE>
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 late fees and the
estimated amount of finance charges billed to accounts that were
charged-off as uncollectible in that month; by
- the balance outstanding as of the beginning of the month.
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SUMMARY CHARGE-OFF INFORMATION
The accounts in the Sears Portfolio had the following annualized gross
charge-off and recoveries percentages:
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
ENDED ENDED
JANUARY 31, 1999 JANUARY 31, 1999 1998 1997 1996
----------------- ---------------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross Charge-Offs as a % of balances...... 8.40% 8.76% 8.82% 7.61% 5.12%
Recoveries as a % of balances............. 1.38% 1.37% 1.35% 1.06% 0.79%
</TABLE>
All rates shown are unweighted averages of monthly rates annualized for each
period shown. Sears calculated the monthly rate by dividing:
- either (i) the amount of charged-off receivables for that month
minus late fees and the estimated amount of finance charges
billed to accounts that were charged-off as uncollectible in that
month, or (ii) the amount of recoveries for that month, as
applicable; by
- the balance outstanding as of the beginning of the month.
For a discussion of Sears change to a new aging methodology in connection with
the conversion of its proprietary receivables processing system to the TSYS
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 JANUARY 31,
1999 (2) 1998 (2) 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Delinquencies as a % of balances (3)
60-89 days past due........................... 1.97% 1.99% 1.96% 1.66%
90-119 days past due.......................... 1.53% 1.53% 1.45% 1.16%
120 days or more past due..................... 3.45% 3.46% 2.97% 2.18%
------ ------ ----- -----
Total Delinquencies 6.95% 6.98% 6.38% 5.00%
====== ====== ===== =====
</TABLE>
__________________
(1) For a discussion of Sears change to a new aging methodology in connection
with the conversion of its proprietary receivables processing system to the
TSYS account processing system, see the Trust's Current Report on Form 8-K
filed on May 14, 1998.
(2) We determined these percentages using the monthly percentages for all
accounts for months ended on or prior to October 31, 1998, and the monthly
percentages for the approximately 88% of accounts that had not been
converted for subsequent months.
(3) Under Sears proprietary receivables processing system, 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. The
data above reflect 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. Sears divides
delinquencies as of the end of each billing cycle by balances at the
beginning of that month.
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Under the TSYS processing system, Sears and the Bank determine delinquency
levels for accounts using an aging methodology that is based on the number
of billing cycles that have commenced since the customer failed to make a
required payment. The following data reflect converted accounts for which
the customer has failed to make a required payment in each of the last
three, four, and five or more billing cycles, respectively. The
performance of the converted accounts may not be representative of the
total Sears Portfolio.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JANUARY 31, 1999
-----------------------------------
UNCONVERTED CONVERTED
ACCOUNTS (88% OF ACCOUNTS (12% OF
SEARS PORTFOLIO) SEARS PORTFOLIO)
---------------- ----------------
<S> <C> <C>
Delinquencies as a % of balances
60-89 days past due..................... 1.96% 2.36%
90-119 days past due.................... 1.58% 1.85%
120 days or more past due............... 3.55% 5.25%
----- -----
Total Delinquencies 7.09% 9.46%
===== =====
</TABLE>
SUMMARY PAYMENT RATE INFORMATION
The accounts in the Sears Portfolio had the following monthly payment rates:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED JANUARY 31,
PAYMENT RATES 1999 1998 1997 1996
- ------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Average Monthly Rate............... 6.55% 6.51% 6.14% 6.29%
Highest Monthly Rate............... 7.06% 6.89% 6.64% 6.83%
Lowest Monthly Rate................ 6.15% 6.15% 5.81% 5.86%
</TABLE>
Sears calculates the payment rate by dividing:
- cash received during each month; by
- the balance outstanding as of the beginning of that month.
7
