Author Topic: SHLDQ - Sears Holdings Corp  (Read 3049109 times)

DRValue

  • Sr. Member
  • ****
  • Posts: 489
Re: SHLDQ - Sears Holdings Corp
« Reply #9230 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.
[E]xpedience does not license omnipotence.

Not Investment Advice. Do Your Own Research.


Mephistopheles

  • Hero Member
  • *****
  • Posts: 1883
Re: SHLDQ - Sears Holdings Corp
« Reply #9231 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

  • Sr. Member
  • ****
  • Posts: 489
Re: SHLDQ - Sears Holdings Corp
« Reply #9232 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?
[E]xpedience does not license omnipotence.

Not Investment Advice. Do Your Own Research.

valueinvestor

  • Sr. Member
  • ****
  • Posts: 422
Re: SHLDQ - Sears Holdings Corp
« Reply #9233 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

  • Hero Member
  • *****
  • Posts: 1876
Re: SHLDQ - Sears Holdings Corp
« Reply #9234 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

  • Hero Member
  • *****
  • Posts: 1536
Re: SHLDQ - Sears Holdings Corp
« Reply #9235 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

  • Sr. Member
  • ****
  • Posts: 422
Re: SHLDQ - Sears Holdings Corp
« Reply #9236 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!

heth247

  • Hero Member
  • *****
  • Posts: 616
Re: SHLDQ - Sears Holdings Corp
« Reply #9237 on: November 28, 2018, 05:11:49 PM »
what is the CUSIP for the 18 debt? Is there chance that those debt be converted to equity? thanks

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.
« Last Edit: November 28, 2018, 05:14:37 PM by heth247 »

TwoCitiesCapital

  • Hero Member
  • *****
  • Posts: 2808
Re: SHLDQ - Sears Holdings Corp
« Reply #9238 on: November 28, 2018, 05:49:27 PM »
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.

+1

Warren Buffett has said previously that there were times he took on the debt that he wishes he would've taken on the equity - but that is only clear in hindsight.

The debtholders control the bankruptcy process AND get paid before equity. If you've done the leg-work and believe that there's value in the equity, it would be foolish to not play the debt, which is far safer, for the 333% return. Until the market starts doing that and pricing the debt correctly, you can bet that the outcome for equity isn't going to be pretty.

And, if the debt re-prices, there's likely still a very good opportunity to roll into the equity to get the residual as well.

bizaro86

  • Hero Member
  • *****
  • Posts: 1536
Re: SHLDQ - Sears Holdings Corp
« Reply #9239 on: November 28, 2018, 07:06:12 PM »
what is the CUSIP for the 18 debt? Is there chance that those debt be converted to equity? thanks

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.

I bought the '18s at IB with IBCID93564153. They are bid $26.5 and ask $27. They could be converted to equity in a restructured SHLD as part of the chapter 11 process, but it would be equity in a new go-forward entity, not the pre-bankruptcy equity.