SRG - Seritage Growth Properties

[CorpRaider]

Not very scientific, but I decided a while ago to wait until sears filed and the press started talking about the potential for fraudulent transfer issues before looking more closely again.

[Shane]

We've known SHLD is going bankrupt for a long time, I believe the market expected it to most likely be this year or early next (based on sell side reports).  With the new loan from Berkshire... I view this as largely a non-issue.  We know the value is there and the path to realize it is pretty clear.  They will continue to develop properties and I would imagine some additional financing could be raised as they show progress.

Both Eddie and WEB have a vested interest in making this work.  Eddie controls the tenant going bankrupt and is a massive holder of SRG equity.  WEB owns the debt and a good slug of equity.  It is a pretty good set-up, IMO.

[RadMan24]

without that loan, the stock would be getting crushed. sears liquidation would hurt with no financing back drop and sharks would be swimming for higher rates. Everyone tried to sell the story 7% was highway robbery. It wasn't.

[BTShine]

without that loan, the stock would be getting crushed. sears liquidation would hurt with no financing back drop and sharks would be swimming for higher rates. Everyone tried to sell the story 7% was highway robbery. It wasn't.

Agreed. 

Also, Shane you’re right.  The present value of the rental stream from SHLD was not more than a couple hundred million.  The value created via redevelopment, if it goes well, is over $500m a year.  The real story here is redevelopment.  It’s not rent from SHLD.

[Saluki]

I would keep an eye on the cumulative redeemable preferreds.  I'm overweight SRG so I don't know if I'd buy more common, but I regret not getting the preferred (SRG-PA) when it was down at $20 (callable at $25). It pays over 7%, is cumulative and when it dropped down to $20 the effective interest rate was +11% if I recall correctly. It's higher up in priority than the common in case of bankruptcy, has a $25 liquidation preferrence and if the common is investable then the preferreds are money good.   

It's trading just under $23 now, so not a screaming bargain but if SHLD files for bankruptcy it might look attractive on the dip.

[Shane]

without that loan, the stock would be getting crushed. sears liquidation would hurt with no financing back drop and sharks would be swimming for higher rates. Everyone tried to sell the story 7% was highway robbery. It wasn't.

This is true, but the company has been working on a refinancing option for a long time.  The management is quality, they're not going to sit on their hands waiting for a disaster to strike.

[Candyman1]

SRG will lose about $33.5 million in revenues from SHLD it looks like based on the Q2 number. Out of total revenues for Q2 of $49.2 million. If one annualizes the SHLD payments one gets to a loss of revenue from SHLD of $134 million. Assuming there is a Chapter 7 filing. Not sure how much SRG will be able to get out of the SHLD Chapter 7 or 11 filing. Not sure how SHLD is able to make it through Chapter 11. Just the process will cost a lot of money.

[Candyman1]

without that loan, the stock would be getting crushed. sears liquidation would hurt with no financing back drop and sharks would be swimming for higher rates. Everyone tried to sell the story 7% was highway robbery. It wasn't.

This is true, but the company has been working on a refinancing option for a long time.  The management is quality, they're not going to sit on their hands waiting for a disaster to strike.

Keep in mind that at the same time SRG management is supposed to raise a lot more money it looks it is about to lose $134 million in revenue payments from SHLD. The Q2 loss would have been about $78 million rather than $44 million.

[Candyman1]

without that loan, the stock would be getting crushed. sears liquidation would hurt with no financing back drop and sharks would be swimming for higher rates. Everyone tried to sell the story 7% was highway robbery. It wasn't.

This is true, but the company has been working on a refinancing option for a long time.  The management is quality, they're not going to sit on their hands waiting for a disaster to strike.

Keep in mind that at the same time SRG management is supposed to raise a lot more money it looks it is about to lose $134 million in revenue payments from SHLD. The Q2 loss would have been about $78 million rather than $44 million.

One more point ... it seems Eddie L and SHLD weren't expecting to file as they seem to still be looking for DIP financing. Not sure why you think SRG management was aware already of the coming BK filing.

[Candyman1]

without that loan, the stock would be getting crushed. sears liquidation would hurt with no financing back drop and sharks would be swimming for higher rates. Everyone tried to sell the story 7% was highway robbery. It wasn't.

This is true, but the company has been working on a refinancing option for a long time.  The management is quality, they're not going to sit on their hands waiting for a disaster to strike.

Keep in mind that at the same time SRG management is supposed to raise a lot more money it looks it is about to lose $134 million in revenue payments from SHLD. The Q2 loss would have been about $78 million rather than $44 million.

One more point ... it seems Eddie L and SHLD weren't expecting to file as they seem to still be looking for DIP financing. Not sure why you think SRG management was aware already of the coming BK filing.

And in case of a Chapter 7 filing, 900 more SHLD stores are about to hit the market.