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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): September 15, 1999
Sears Credit Account Master Trust II
- -------------------------------------------------------------------------------
(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) 434-3176
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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 September 15, 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 $425,000,000 aggregate principal amount of Series
1999-2 Class A Master Trust Certificates and $30,000,000 aggregate principal
amount of Series 1999-2 Class B 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 September 15, 1999 of Sears Credit
Account Master Trust II, Series 1999-2.
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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: September 15, 1999 By: /s/ George F. Slook
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George F. Slook
President and Chief Executive Officer
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EXHIBIT INDEX
Exhibit 99 Series Term Sheet dated September 15, 1999 of Sears Credit
Account Master Trust II, Series 1999-2
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EXHIBIT 99
SUBJECT TO REVISION
SERIES TERM SHEET DATED SEPTEMBER 15, 1999
SEARS CREDIT ACCOUNT MASTER TRUST II
$425,000,000 ____% CLASS A MASTER TRUST CERTIFICATES, SERIES 1999-2
$30,000,000 ____% CLASS B MASTER TRUST CERTIFICATES, SERIES 1999-2
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.
UNDERWRITERS OF THE CLASS A CERTIFICATES
CREDIT SUISSE FIRST BOSTON
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
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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 1999-2
Supplement to the Pooling and Servicing Agreement.
<TABLE>
<CAPTION>
<S> <C>
THE TRUST.......................................... Sears Credit Account Master Trust II.
THE CERTIFICATES................................... $425,000,000 ___% Class A Master Trust Certificates, Series
1999-2.
$30,000,000 ___% Class B Master Trust Certificates, Series
1999-2. SRFG reserves the right to retain the Class B
certificates.
SELLER RETAINED CERTIFICATES....................... $45,000,000 Class C Master Trust Certificates, Series
1999-2. 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 October 1999.
PRINCIPAL PAYMENTS................................. The Trust is scheduled to pay Class A principal in 12 equal
monthly payments of $35,416,666.67 on the 15th day of each
month (or, if not a business day, the next business day)
beginning in March 2002 and ending in February 2003.
The Trust is scheduled to pay Class B principal in 2
equal monthly payments of $15,000,000.00 on March 15,
2003 (or, if not a business day, the next business day)
and April 15, 2003 (or, if not a business day, the next
business day).
CLASS A EXPECTED FINAL PAYMENT DATE................ February 15, 2003 (or, if not a business day, the next
business day).
CLASS B EXPECTED FINAL PAYMENT DATE................ April 15, 2003 (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 August
1999 was $9,934,291,327, consisting of $9,770,159,935 of
principal receivables and $164,131,392 of finance charge
receivables.
"Due Period" for any account is the period 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>
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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 February 15, 2007 (or, if February
15, 2007 is not a business day, the second business day
after February 15, 2007). 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.
In May 1998, Sears entered into an agreement with Total Systems Services, Inc.
("TSYS") to provide processing services relating to the Sears Portfolio,
including the receivables in the Trust. The new system will allow Sears and
Sears National Bank to enhance their customer relationships and improve service
support of Sears multiple business formats. Sears converted from its proprietary
processing system to a TSYS processing system in three phases, completing the
first in October 1998 (affecting approximately 12% of the accounts in the Sears
Portfolio), the second in March 1999 (affecting approximately 38% of accounts),
and the last in April 1999 (affecting the remaining 50% of accounts). TSYS now
processes all accounts.
The new processing system also has enabled Sears to change its methodology for
aging and charging off accounts. As a result, certain accounts are generally
considered delinquent earlier and charged off sooner than was previously the
case. These changes reflect a reclassification of account status rather than a
change in actual performance of the account. For a discussion of Sears change to
a new aging methodology in connection with the conversion, which affected
reported delinquencies and gross charge-off levels, see the Trust's Current
Report on Form 8-K filed on May 14, 1998.
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
CREDIT LIMIT AS OF BILLING CYCLES ENDED IN
------------ 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>
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(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. Specific approval generally 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.
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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>
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 56% 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 (1):
<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>
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(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.
SUMMARY YIELD INFORMATION
The accounts in the Sears Portfolio had the following annualized
aggregate monthly yields:
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
ENDED ENDED
AUGUST 31, 1999 AUGUST 31, 1999 1998 1997 1996
--------------- --------------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Aggregate Monthly Yield.............. 19.34% 20.19% 20.59% 20.27% 18.67%
</TABLE>
Aggregate monthly yield is the unweighted average of monthly yields annualized
for each period shown. Sears calculates "monthly yield" by dividing:
- monthly finance charges and late fees minus estimated
accumulated finance charges and late fees billed to
accounts charged-off 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
AUGUST 31, 1999 AUGUST 31, 1999 1998 1997 1996
--------------- --------------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross Charge-Offs as a % of balances............. 8.50% 8.50% 8.82% 7.61% 5.12%
Recoveries as a % of balances.................... 1.58% 1.54% 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 estimated accumulated finance
charges and late fees billed to those accounts, or
(ii) the amount of recoveries for that month, as
applicable; by
- the balance outstanding as of the beginning of the
month.
SUMMARY DELINQUENCY AGING INFORMATION
The accounts in the Sears Portfolio had the following delinquency profiles (1):
<TABLE>
<CAPTION>
EIGHT MONTHS ENDED
AUGUST 31, 1999 (2) 1998 (3) 1997 1996
------------------ ---- ---- ----
<S> <C> <C> <C> <C>
Delinquencies as a % of balances (4)
60-89 days past due............................. 2.00% 1.99% 1.96% 1.66%
90-119 days past due............................ 1.54% 1.53% 1.45% 1.16%
120 days or more past due....................... 4.41% 3.46% 2.97% 2.18%
----- ----- ----- -----
Total Delinquencies 7.95% 6.98% 6.38% 5.00%
===== ===== ===== =====
</TABLE>
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(1) Delinquencies for 1998, 1997 and 1996 have been reported using data
from Sears proprietary receivables processing system. Delinquencies for
the eight months ended August 31, 1999 have been reported using data
from the TSYS account processing system.
(2) These percentages have been calculated using the monthly percentages
for accounts converted to the TSYS account processing system. For the
following months within 1999, the converted accounts represented the
following percentages of the portfolio balances: January, 14%;
February, 13%; March, 45%; April, 70%; and thereafter, 100%. Prior to
May, the converted portions of the receivables may not have been
representative of results for the entire portfolio.
(3) These percentages have been calculated 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 the months ended November 30 and December 31,
1998.
(4) The TSYS delinquency data reflect 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. Delinquencies reported for
accounts processed under TSYS are calculated by dividing delinquencies
as of the end of each month by balances at the beginning of each month.
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The proprietary system delinquency data reflect the percentage of
account balances for which the cumulative past due amount was three,
four, and five or more times, respectively, the scheduled minimum
monthly payment. Delinquencies processed under the proprietary system
were calculated by dividing delinquencies as of the end of each billing
cycle by balances at the beginning of that month.
SUMMARY PAYMENT RATE INFORMATION
The accounts in the Sears Portfolio had the following monthly payment
rates:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED
PAYMENT RATES AUGUST 31, 1999 1998 1997 1996
- ------------- --------------- ---- ---- ----
<S> <C> <C> <C> <C>
Average Monthly Rate.............................. 6.71% 6.51% 6.14% 6.29%
Highest Monthly Rate.............................. 7.42% 6.89% 6.64% 6.83%
Lowest Monthly Rate............................... 6.16% 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.
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