Author Topic: SHLDQ - Sears Holdings Corp  (Read 2795791 times)

Mephistopheles

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Re: SHLDQ - Sears Holdings Corp
« Reply #9250 on: October 20, 2018, 08:53:59 AM »
Him buying 400 stores seems very positive to me, even if he takes them below current assets (inventory and cash in the till). Should be a big drop in severance/restructuring if he takes on a bunch of leases and employees.

That's if the company doesn't liquidate. If creditors don't approve of the restructuring then they're liquidating, which I think is better anyway. They're projected to burn $200 million in the next 30 days..the longer they stay open, the more burn (and less money to go around).


Spekulatius

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Re: SHLDQ - Sears Holdings Corp
« Reply #9251 on: October 20, 2018, 04:46:01 PM »
Him buying 400 stores seems very positive to me, even if he takes them below current assets (inventory and cash in the till). Should be a big drop in severance/restructuring if he takes on a bunch of leases and employees.

That's if the company doesn't liquidate. If creditors don't approve of the restructuring then they're liquidating, which I think is better anyway. They're projected to burn $200 million in the next 30 days..the longer they stay open, the more burn (and less money to go around).

Creditors may mind getting screwed by Fast Eddie a second time. I would probably vote for liquidation too, if I were a bond owner.
« Last Edit: October 21, 2018, 05:45:30 AM by Spekulatius »
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Value^2

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Re: SHLDQ - Sears Holdings Corp
« Reply #9252 on: October 20, 2018, 10:47:51 PM »
For sure, lots of assumptions necessary. However, Seritage got $13.5 MM for 4 non big city KMart locations. I doubt unencumbered properties are crappier than those, so $3.375MM per property also seems like a reasonable/conservative guess on per property value.

True

Now the question of how many properties does SHLD still own as of now. Anyone know where to direct me for that?

I think its about ~350... about same amount what eddie tries to buy.

 

Can't be that many. Last 10-k showed 307 owned stores.

That's why i said "about".


Quote
Eddie is proposing to buy 400 stores, not the real estate, but the actual operations (because they are EBITDA positive).
Could you elaborate, where you got this information?
« Last Edit: October 20, 2018, 10:50:44 PM by Value^2 »

DRValue

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Re: SHLDQ - Sears Holdings Corp
« Reply #9253 on: October 21, 2018, 01:49:09 AM »
It seems that Eddie converted his PIK notes and owns ~74.5% of common. There's about ~200M shares outstanding.

I convinced myself yesterday that retail bond and shareholders didn't stand a chance here, but I'll monitor the bankruptcy for a hint on the 2018 secured bonds.

Then I read your post and it's positive. Where did you get the info? I can't find anything on the sec.
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Mephistopheles

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Re: SHLDQ - Sears Holdings Corp
« Reply #9254 on: October 25, 2018, 09:10:54 AM »
For sure, lots of assumptions necessary. However, Seritage got $13.5 MM for 4 non big city KMart locations. I doubt unencumbered properties are crappier than those, so $3.375MM per property also seems like a reasonable/conservative guess on per property value.

True

Now the question of how many properties does SHLD still own as of now. Anyone know where to direct me for that?

I think its about ~350... about same amount what eddie tries to buy.

 

Can't be that many. Last 10-k showed 307 owned stores.

That's why i said "about".


Quote
Eddie is proposing to buy 400 stores, not the real estate, but the actual operations (because they are EBITDA positive).
Could you elaborate, where you got this information?

Right, but I had already stated it has to be <= the # in the 10-k, or 307, the question is how many less.

The 400 store buyout proposal is in the BK filing docket 3:

The Debtors believe that there is a viable path forward for a reorganization around a smaller footprint of profitable stores. "Approximately 400 of the Debtors’ stores are four-wall EBITDA positive (before any lease concessions)—the Debtors intend to sell these and other viable stores, or a substantial portion thereof, as a going concern pursuant to section 363 of the Bankruptcy Code. A successful sale of these viable stores as a going concern not only will save Sears and Kmart (as defined herein), but also the jobs of the tens of thousands of employees that depend on the continued operation of such stores. The Debtors are in discussions with ESL regarding a stalking-horse bid for the purchase of the Company’s viable store base, which would be a right-sized version of the Company that would be operated as a going concern. "

https://restructuring.primeclerk.com/sears/Home-DocketInfo?DockSearchValue=

DRValue

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Re: SHLDQ - Sears Holdings Corp
« Reply #9255 on: October 26, 2018, 10:41:02 AM »
For sure, lots of assumptions necessary. However, Seritage got $13.5 MM for 4 non big city KMart locations. I doubt unencumbered properties are crappier than those, so $3.375MM per property also seems like a reasonable/conservative guess on per property value.

True

Now the question of how many properties does SHLD still own as of now. Anyone know where to direct me for that?

I think its about ~350... about same amount what eddie tries to buy.

 

Can't be that many. Last 10-k showed 307 owned stores.

That's why i said "about".


Quote
Eddie is proposing to buy 400 stores, not the real estate, but the actual operations (because they are EBITDA positive).
Could you elaborate, where you got this information?

Right, but I had already stated it has to be <= the # in the 10-k, or 307, the question is how many less.

The 400 store buyout proposal is in the BK filing docket 3:

The Debtors believe that there is a viable path forward for a reorganization around a smaller footprint of profitable stores. "Approximately 400 of the Debtors’ stores are four-wall EBITDA positive (before any lease concessions)—the Debtors intend to sell these and other viable stores, or a substantial portion thereof, as a going concern pursuant to section 363 of the Bankruptcy Code. A successful sale of these viable stores as a going concern not only will save Sears and Kmart (as defined herein), but also the jobs of the tens of thousands of employees that depend on the continued operation of such stores. The Debtors are in discussions with ESL regarding a stalking-horse bid for the purchase of the Company’s viable store base, which would be a right-sized version of the Company that would be operated as a going concern. "

https://restructuring.primeclerk.com/sears/Home-DocketInfo?DockSearchValue=

So, Eddie takes the stores in payment for his bonds and leaves nothing for everyone else?
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valueinvestor

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Re: SHLDQ - Sears Holdings Corp
« Reply #9256 on: November 25, 2018, 09:30:22 PM »
Surprised that no one put this one up, but this speculative thesis is quite simple. If there were more assets than liabilities, then shouldn't there be some value to be had? It's similar to the GGP situation, where there were more assets than liabilities, and the creditors were only entitled to enough assets to cover 100% of the liabilties, and the residual value left over was for the equity holders. I'm NOT an expert in bankruptcy law, and I have never invested in Sears, therefore I did not do any research on the company, besides reading Bruce Berkowitz take on it.

However, I did make a pretty penny, by putting pennies into GGP back in the day. Hoping there could be some parallels here, what do you all think?

DTEJD1997

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Re: SHLDQ - Sears Holdings Corp
« Reply #9257 on: November 25, 2018, 11:04:26 PM »
I do not know this for a certainty...but I think the bankruptcy situations of these companies are totally different.

If I recall correctly, GGP was a "technical" bankruptcy, they had problems with a lender who would not roll over their debt?  The business was largely in decent shape, but management had to use the BK as a tool of leverage.  I've seen this a few times, and astute investors can make TRAINLOADS of cash on it.

In SHLD's case, their business just fell apart and the company is a mess.  The company is not cashflowing and the value of the assets is questionable (in terms of BK recovery).

So I don't think this will work out the same as GGP.

bizaro86

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Re: SHLDQ - Sears Holdings Corp
« Reply #9258 on: November 26, 2018, 07:47:10 AM »
GGP had a liquidity problem, not a solvency problem. They had good assets that were making money. Plus, the economy was rebounding from the biggest recession in memory.

Sears doesn't have a profitable base business. They have some nice assets, mostly real estate, but the longer this takes the worse off they are. The inventory gets stale and the fees add up. GGP was making money during BK, so they were actually getting stronger over time. That's important, because basically all the advisors in the process have an incentive for it to take as long as possible.

I have a position in the '18 debt, which trades at less than $0.30. If you think there is potential here that seems like a way better option. For the equity to get anything the debt would need to be dealt with fully, which makes the debt a 3 bagger. But there are a lot of lesser scenarios where the debt works out way better than the equity.

I think if you're considering the equity you should have a reason why the market is pricing the debt so much lower than what you perceive it's fair value to be. Because if the equity is in the money at all there is a multi-billion market inefficiency in the debt.

valueinvestor

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Re: SHLDQ - Sears Holdings Corp
« Reply #9259 on: November 28, 2018, 08:49:20 AM »
GGP had a liquidity problem, not a solvency problem. They had good assets that were making money. Plus, the economy was rebounding from the biggest recession in memory.

Sears doesn't have a profitable base business. They have some nice assets, mostly real estate, but the longer this takes the worse off they are. The inventory gets stale and the fees add up. GGP was making money during BK, so they were actually getting stronger over time. That's important, because basically all the advisors in the process have an incentive for it to take as long as possible.

I have a position in the '18 debt, which trades at less than $0.30. If you think there is potential here that seems like a way better option. For the equity to get anything the debt would need to be dealt with fully, which makes the debt a 3 bagger. But there are a lot of lesser scenarios where the debt works out way better than the equity.

I think if you're considering the equity you should have a reason why the market is pricing the debt so much lower than what you perceive it's fair value to be. Because if the equity is in the money at all there is a multi-billion market inefficiency in the debt.

That's a smart way to look at it! Thank you!