SHLDQ - Sears Holdings Corp

[Matson125]

Every 1% change in Fairholme's ownership will now require an amended 13D. If Fairholme has been a buyer in scale at these prices we should see a filing soon.

 

http://www.law.cornell.edu/cfr/text/17/240.13d-2

(a) If any material change occurs in the facts set forth in the Schedule 13D (§ 240.13d-101) required by § 240.13d-1(a), including, but not limited to, any material increase or decrease in the percentage of the class beneficially owned, the person or persons who were required to file the statement shall promptly file or cause to be filed with the Commission an amendment disclosing that change. An acquisition or disposition of beneficial ownership of securities in an amount equal to one percent or more of the class of securities shall be deemed “material” for purposes of this section; acquisitions or dispositions of less than those amounts may be material, depending upon the facts and circumstances.

 

 

[ni-co]

I don't think there's necessarily anything weird going on here between ESL and Berkowitz.

...

Presumably, Berkowitz filed a 13D because he isn't just some lender, but also a substantial holder of SHLD common (over 5%). 

...

So, yeah, I don't think there's any reason to delve into conspiracy theory here.

 

What I meant by the 13D requirement is the following:

 

(1) If Berkowitz was required to file a 13D, then that's a non-signal.

(2) If Berkowitz was not required to file a 13D, then switching from a 13G to a 13D would give us a little peek behind the curtain.

 

I'm basically trying to figure out if Berkowitz is pissed or pleased right now. For instance, was Berkowitz happy that St. Joe is getting a chance to participate? Or is St. Joe the unexpected houseguest right now?

 

Me too. Is there even a possibility that the board (and therefore Alvarez) didn't know of this ESL bridge loan before the filing? Seems really odd to me that this wasn't a joint filing from ESL and Berkowitz and that it seems to be totally uncoordinated. Would there be legal reasons to file separately?

[CorpRaider]

Seems like Berkowitz likely had to nudge his way into the deal, otherwise he presumably wouldn't have been buying tons of stock right before ESL dropped a bomb on him, after which he has gone active on the position.  Of course, it probably wouldn't have been as much of a bomb if he had been included in the loan on the front end.

[merkhet]

I don't think there's necessarily anything weird going on here between ESL and Berkowitz.

...

Presumably, Berkowitz filed a 13D because he isn't just some lender, but also a substantial holder of SHLD common (over 5%). 

...

So, yeah, I don't think there's any reason to delve into conspiracy theory here.

 

What I meant by the 13D requirement is the following:

 

(1) If Berkowitz was required to file a 13D, then that's a non-signal.

(2) If Berkowitz was not required to file a 13D, then switching from a 13G to a 13D would give us a little peek behind the curtain.

 

I'm basically trying to figure out if Berkowitz is pissed or pleased right now. For instance, was Berkowitz happy that St. Joe is getting a chance to participate? Or is St. Joe the unexpected houseguest right now?

 

Me too. Is there even a possibility that the board (and therefore Alvarez) didn't know of this ESL bridge loan before the filing? Seems really odd to me that this wasn't a joint filing from ESL and Berkowitz and that it seems to be totally uncoordinated. Would there be legal reasons to file separately?

 

You'll notice that Berkowitz seemed to have stopped buying about a week before the news of the ESL loan came out -- so I'd be really surprised if Alvarez didn't know about this beforehand -- it's possible that the committee put together to approve the loan didn't include Alvarez, but it's strange to think he wouldn't have been notified about it.

 

The real question to me is what CorpRaider pointed out -- was he supposed to be there or did he find out the cool kids were hosting a party and showed up uninvited?

[Luke 532]

Somebody e-mailed me today with the chart below regarding SPG and SHLD.  Curious if the 40 anchor store decline (5.7M sq ft) is due to planned redevelopment, pending sub-leases, other, etc.  Thoughts?

 

Date          # Stores      Sq Ft    % of SPG

6-30-14    76              12.55M  6.9%

3-31-14    116            18.25M  7.7%

12-31-13  116            18.25M  7.7%

9-30-13    118            18.48M  7.8%

6-30-13    118            18.48M  7.7%

 

spinoffs.

 

Exactly, that's just from SPG spinning off WPG. Interestingly, WPG just announced a deal to buy GRT to increase the quality of their portfolio and the stock got crushed. If you want some solid real estate (similar to Seritage's properties), at a good price, and without Sears' retail operations baggage, take a look at WPG under $17/share (FD: I'm long).

 

Thanks for the explanation.

[CorpRaider]

Joe is getting clubbed this morning.  Maybe ESL is secretly conspiring to make Einhorn rich(er).  ;D

 

But somewhat more seriously it seems to me that had Berkowitz been involved on the front end they would have made that public.  I mean on the one hand you could say ESL may just not care/be tone deaf to what the equity market thinks, on the other hand he should be interested in calming down credit markets and suppliers who apparently have tightened the screws and having two famous investors with deep pockets sponsoring the company is much different than one guy who may be piloting his yacht into the bermuda triangle with only Atlas Shrugged as his guide.  I mean you can talk your way out of a hostage situation but you can't get a factor from CIT Group or GE Capital?

 

 

[dowfin1]

Alvarez likely approved the deal and asked to participate.

 

From the WSJ article:

 

Mr. Brathwaite [the Sears spokesman] said the loan was approved by the company's

board and complied with its code of conduct governing monetary arrangements between directors and the company.

[ni-co]

Is there any news today? Or are we still in the post loan announcement  sell off?

[dbuch]

On Baker Street:

 

I think 2 million contracts would be 2 million contracts x 100 shares per contract meaning $80M divided by 2M contracts divided by 100 shares per contract = 40 cents a call option which makes sense. I don't think they could value AUM at $210 million and consider an $80M call option that is actually only currently worth $2m. I think it is actually $80m worth of calls.

 

http://www.sec.gov/Archives/edgar/data/1488207/000092189514001846/0000921895-14-001846-index.htm

 

[Picasso]

On Baker Street:

 

I think 2 million contracts would be 2 million contracts x 100 shares per contract meaning $80M divided by 2M contracts divided by 100 shares per contract = 40 cents a call option which makes sense. I don't think they could value AUM at $210 million and consider an $80M call option that is actually only currently worth $2m. I think it is actually $80m worth of calls.

 

http://www.sec.gov/Archives/edgar/data/1488207/000092189514001846/0000921895-14-001846-index.htm

 

No the contracts control 2 million shares.  So he has 20,000 contracts which might be worth 1-2 million dollars today.  I would have to look at the options to see where they trade now.

[dbuch]

Then why do they have $210M in AUM? and not $132M in AUM?

[Picasso]

Maybe he has lots of cash or bond investments. 

[adesigar]

On Baker Street:

 

I think 2 million contracts would be 2 million contracts x 100 shares per contract meaning $80M divided by 2M contracts divided by 100 shares per contract = 40 cents a call option which makes sense. I don't think they could value AUM at $210 million and consider an $80M call option that is actually only currently worth $2m. I think it is actually $80m worth of calls.

 

http://www.sec.gov/Archives/edgar/data/1488207/000092189514001846/0000921895-14-001846-index.htm

 

Total Sears shares outstanding is 106 million.

 

2 Million contracts with 100 shares per contract would be 200 million shares

[Picasso]

On Baker Street:

 

I think 2 million contracts would be 2 million contracts x 100 shares per contract meaning $80M divided by 2M contracts divided by 100 shares per contract = 40 cents a call option which makes sense. I don't think they could value AUM at $210 million and consider an $80M call option that is actually only currently worth $2m. I think it is actually $80m worth of calls.

 

http://www.sec.gov/Archives/edgar/data/1488207/000092189514001846/0000921895-14-001846-index.htm

 

Total Sears shares outstanding is 106 million.

 

2 Million contracts with 100 shares per contract would be 200 million shares

 

Nothing says balls to the wall bullish like buying options on more than all the shares outstanding

[ni-co]

Is there any news today? Or are we still in the post loan announcement  sell off?

 

If anybody is interested: It's our friend Gary Balter from Credit Suisse once more.

http://seekingalpha.com/news/1989935-no-happy-ending-for-sears-story-says-credit-suisse

[Picasso]

Is there any news today? Or are we still in the post loan announcement  sell off?

 

If anybody is interested: It's our friend Gary Balter from Credit Suisse once more.

http://seekingalpha.com/news/1989935-no-happy-ending-for-sears-story-says-credit-suisse

 

That was from yesterday.  Todays selloff is from something else, considering the Berkowitz news initially pushed up shares.

 

Then again we know the market is not exactly the most efficient.

[Mephistopheles]

http://finance.yahoo.com/news/shareholder-alert-law-firm-levi-160700364.html

 

Not sure if anyone noticed this

[nkp007]

Is it crazy to think that Berkowitz wants to participate in the loan via JOE as a point of leverage, not because the loan itself is a good investment for JOE?

 

In other words, if he's not talking to Lampert directly (which explains the lack of coordination), maybe it's a way to gain more information and eventually exert more control, thereby protecting his equity stake.

[Picasso]

Is it crazy to think that Berkowitz wants to participate in the loan via JOE as a point of leverage, not because the loan itself is a good investment for JOE?

 

In other words, if he's not talking to Lampert directly (which explains the lack of coordination), maybe it's a way to gain more information and eventually exert more control, thereby protecting his equity stake.

 

I suppose next time he goes on CNBC he will not be saying "I may be in the minority but I think Eddie has done a pretty good job."

 

More along the lines "let's just say Eddie will not be getting any Christmas cards this year."

[JRH]

Is it crazy to think that Berkowitz wants to participate in the loan via JOE as a point of leverage, not because the loan itself is a good investment for JOE?

 

In other words, if he's not talking to Lampert directly (which explains the lack of coordination), maybe it's a way to gain more information and eventually exert more control, thereby protecting his equity stake.

 

I trust Berkowitz not to abuse JOE shareholders like that, but maybe it's both?

 

I'm in the camp that believes you could count the number of times Berkowitz and Lampert have talked on one hand. Berkowitz owns ~25% of SHLD, and is asking to provide 25% of the loan. But, probably a coincidence.

[Kraven]

Is it crazy to think that Berkowitz wants to participate in the loan via JOE as a point of leverage, not because the loan itself is a good investment for JOE?

 

In other words, if he's not talking to Lampert directly (which explains the lack of coordination), maybe it's a way to gain more information and eventually exert more control, thereby protecting his equity stake.

 

If so, he runs the risk of obtaining material non public information and not being able to trade his stake.  So he would have the knowledge to do something, but be unable to do so.  There is a reason why debt and equity desks are walled off. 

 

I have to say.  I'm truly fascinated by this situation. 

[txlaw]

Is it crazy to think that Berkowitz wants to participate in the loan via JOE as a point of leverage, not because the loan itself is a good investment for JOE?

 

In other words, if he's not talking to Lampert directly (which explains the lack of coordination), maybe it's a way to gain more information and eventually exert more control, thereby protecting his equity stake.

 

It could be both.  Not only could it be a nice investment for JOE -- over-secured debt at a 5% yield -- but it could also allow Bruce B to get more info about SHLD.  (I think JOE is mostly allowed to invest in fixed income.)

 

Now, the thing is, I would assume the info disclosed to lenders is material and non-public (exact properties collateralizing the loan, for example), so that could explain why Berkowitz has "gone active."  That also could mean that Bruce B can no longer buy and sell shares in a way where he isn't considered to be an insider.

[txlaw]

Is it crazy to think that Berkowitz wants to participate in the loan via JOE as a point of leverage, not because the loan itself is a good investment for JOE?

 

In other words, if he's not talking to Lampert directly (which explains the lack of coordination), maybe it's a way to gain more information and eventually exert more control, thereby protecting his equity stake.

 

If so, he runs the risk of obtaining material non public information and not being able to trade his stake.  So he would have the knowledge to do something, but be unable to do so.  There is a reason why debt and equity desks are walled off. 

 

I have to say.  I'm truly fascinated by this situation.

 

Exactly what I was thinking might happen!

[adesigar]

Is there any news today? Or are we still in the post loan announcement  sell off?

 

If anybody is interested: It's our friend Gary Balter from Credit Suisse once more.

http://seekingalpha.com/news/1989935-no-happy-ending-for-sears-story-says-credit-suisse

 

Does anyone remember the price target from analysts and bears from earlier this year, pre lands end spinoff? Does anyone remember their valuation of Lands End which according to them had had been permanently damaged by their association with Sears?

[CorpRaider]

Yeah it is pretty damn interesting.  Berkowitz said many times before that "if SHLD needs capital, they should talk to us."  Sort of reminds me a little of the WEB myriad of entities that got the SEC on his case way back when, but they don't have a CEF mixed up in it so it might not flare up.