CorpRaider Posted October 20, 2014 Share Posted October 20, 2014 Or he doesn't give a crap either way because he has built SHLD into an impregnable fortress of solitude and plans to file for chapter 11 on down the road...or not. Or another theory: he knows the equity mutual funds won't be able to hold this hybrid security and will have to dump the rights: profit....crazy Eddie. A couple of things seem fairly certain; he wasn't getting top shelf/acceptable bids for the assets so that he could avoid raising/investing more cash into SHLD. Those conversations with the LPs cannot be fun. Also, he presumably could not borrow on better terms from a third party lender. I mean 8% with an equity kicker is kind of steep/extremely distressed, especially given the term, no? Link to comment Share on other sites More sharing options...
peridotcapital Posted October 20, 2014 Share Posted October 20, 2014 Somebody sent me this today and I found it interesting (posted with permission, emphasis added by me): The debt has interest of $50M/year, and given that their current EBITDA does not support that, it either means Eddie has lost his marbles, or he seems something big in the near future that is basically as close to a 100% chance of happening as possible which will boost their EBITDA at least enough to pay off that interest. Personally, I don't think that will come from the transformation though because the retail is too unpredictable to make a bet like this with debt and assume you'll have the $50M starting next year to pay the interest. I have a feeling it may come from something bigger like much larger bulk-lease deals in the pipeline right now. It's also likely the reason that the other SHLD bonds rallied today. Generally, existing bonds tend to sell off when new debt is issued, since it's just made the company's capital structure more risky. With Sears today, the opposite happened since Eddie bought unsecured debt (although it was senior). I'd push back on the idea that Sears' EBITDA has anything to do with their capacity for new debt. Operating cash flow is negative and has been for a couple of years. If debt raising decisions are made based on the ability of EBITDA to cover interest expense, they could support no debt whatsoever! This is not a typical situation where they have a leverage ratio target and would increase debt based on growing EBITDA. Sears has run out of money... they are raising subordinated debt because it is one of the levers they have not pulled yet and they need to pull levers every quarter to keep the music playing. Link to comment Share on other sites More sharing options...
valueyoda Posted October 20, 2014 Share Posted October 20, 2014 This is nothing short of a short squeeze. A liquidity crisis is averted until 2015, but next year it simply won't have that many more levers it could pull off to close the funding gap, unless the retail turnaround works or it starts to monetize its real estate aggressively. A few weeks ago, when the stock dropped from $30 to $25 on the rumor that certain vendors pulled the plug, gives an indication how fragile the stock going forward will be. Link to comment Share on other sites More sharing options...
ni-co Posted October 20, 2014 Share Posted October 20, 2014 This is nothing short of a short squeeze. A liquidity crisis is averted until 2015, but next year it simply won't have that many more levers it could pull off to close the funding gap, unless the retail turnaround works or it starts to monetize its real estate aggressively. A few weeks ago, when the stock dropped from $30 to $25 on the rumor that certain vendors pulled the plug, gives an indication how fragile the stock going forward will be. This also shows that the theory that ESL is taking over the "best" real estate and SHLD is heading for bankruptcy as soon as 2015 was complete BS. And there were quite a few proponents of this theory here that suddenly seem to have forgotten about it. Link to comment Share on other sites More sharing options...
BTShine Posted October 20, 2014 Share Posted October 20, 2014 This is nothing short of a short squeeze. A liquidity crisis is averted until 2015, but next year it simply won't have that many more levers it could pull off to close the funding gap, unless the retail turnaround works or it starts to monetize its real estate aggressively. A few weeks ago, when the stock dropped from $30 to $25 on the rumor that certain vendors pulled the plug, gives an indication how fragile the stock going forward will be. This also shows that the theory that ESL is taking over the "best" real estate and SHLD is heading for bankruptcy as soon as 2015 was complete BS. And there were quite a few proponents of this theory here that suddenly seem to have forgotten about it. Good point. Link to comment Share on other sites More sharing options...
benhacker Posted October 20, 2014 Share Posted October 20, 2014 Picasso, how did SRAC CDS respond today? Link to comment Share on other sites More sharing options...
wisdom Posted October 20, 2014 Share Posted October 20, 2014 Have to be careful about not gloating even though it is easy to get carried away with a one day move. It is still going to be a long journey. It could just as easily drop again next week. If we start trying to get back at all the individuals posting when the stock was dropping and then disappear when it rises - we would be doing the same in reverse. I would rather have someone like Chad who is consistent/thoughtful whether the stock is dropping or rising. You know he is not there just to entertain himself and jump on the bandwagon when the stock is dropping. Link to comment Share on other sites More sharing options...
wisdom Posted October 20, 2014 Share Posted October 20, 2014 But you gotta love the conspiracy theorists that were on - As if it is worth ESL's time to try to steal 25 properties from minority shareholders rather trying to build something valuable. Link to comment Share on other sites More sharing options...
CorpRaider Posted October 20, 2014 Share Posted October 20, 2014 It strikes me as odd that he even entered into that transaction and incurred the hundreds of thousands of dollars in associated fees if he was planning to raise a billion in capital a few weeks later. Link to comment Share on other sites More sharing options...
Picasso Posted October 20, 2014 Share Posted October 20, 2014 Picasso, how did SRAC CDS respond today? Plummeted. Down 300 basis points. 2018 2nd lien bonds went up 5%, didn't see much trading activity on the SRAC bonds but the CDS definitely moved. Link to comment Share on other sites More sharing options...
benhacker Posted October 20, 2014 Share Posted October 20, 2014 Picasso, ...didn't see much trading activity on the SRAC bonds but the CDS definitely moved. That was actually why I asked the question... given the nature of this thread, I realized after reading it that I could have looked like I was somehow gloating over a one day move... I was just curious as the CDS appear more liquid than the OTC issues... hence question. Thanks for the answer, I imagine you took the question as it was intended... I hope! :) Link to comment Share on other sites More sharing options...
valueyoda Posted October 21, 2014 Share Posted October 21, 2014 I am wondering what the book value is of Sears Reinsurance Ltd. Link to comment Share on other sites More sharing options...
oddballstocks Posted October 21, 2014 Share Posted October 21, 2014 Have to be careful about not gloating even though it is easy to get carried away with a one day move. It is still going to be a long journey. It could just as easily drop again next week. If we start trying to get back at all the individuals posting when the stock was dropping and then disappear when it rises - we would be doing the same in reverse. I would rather have someone like Chad who is consistent/thoughtful whether the stock is dropping or rising. You know he is not there just to entertain himself and jump on the bandwagon when the stock is dropping. I've been sitting around all day trying to figure out some jokes incorporating ESL's genius for saving the stock price but I can't come up with anything. Seems like you guys have it covered. Maybe we should merge that FFH thread where they're gloating about the success of the hedges with this one. Seems like cause for celebration on these threads, all those years of disappointment have paid off and these investment ideas have finally proven correct! Link to comment Share on other sites More sharing options...
Vish_ram Posted October 21, 2014 Share Posted October 21, 2014 A SHLD investor is like the guy jumping off the 100 story building. yes , investor will feel the rush of air, exhilaration etc. Sooner or later, he will have his tryst with destiny (concrete). Around the 10th story, the investor will find that the air in safety cushion was long gone. Link to comment Share on other sites More sharing options...
adesigar Posted October 21, 2014 Share Posted October 21, 2014 It strikes me as odd that he even entered into that transaction and incurred the hundreds of thousands of dollars in associated fees if he was planning to raise a billion in capital a few weeks later. My guess is he raised those 400 million and then saw the interest from Fairholme/St Joe. Probably decided that he should give all SHLD shareholders a chance rather than just him and Berkowitz and St Joe shareholders. Link to comment Share on other sites More sharing options...
FCharlie Posted October 21, 2014 Share Posted October 21, 2014 This is nothing short of a short squeeze. A liquidity crisis is averted until 2015, but next year it simply won't have that many more levers it could pull off to close the funding gap, unless the retail turnaround works or it starts to monetize its real estate aggressively. A few weeks ago, when the stock dropped from $30 to $25 on the rumor that certain vendors pulled the plug, gives an indication how fragile the stock going forward will be. This also shows that the theory that ESL is taking over the "best" real estate and SHLD is heading for bankruptcy as soon as 2015 was complete BS. And there were quite a few proponents of this theory here that suddenly seem to have forgotten about it. let's not forget the theories that SHLD would be bankrupt in 2008, 2009, 2010, 2011, 2012, and 2013.... and 2014... and 2015? Now it's 2016 right? Link to comment Share on other sites More sharing options...
Scudbucket Posted October 21, 2014 Share Posted October 21, 2014 I think people are forgetting to separate a good business from a good investment. They don't always go hand in hand. Whether or not Sears is a good business is not very important when sentiment is so negative, especially when asset value far exceeds EV. Link to comment Share on other sites More sharing options...
OracleofCarolina Posted October 21, 2014 Share Posted October 21, 2014 This should help the balance sheet going forward..sheesh http://m.nydailynews.com/news/crime/woman-steals-3-7-million-goods-sears-warehouse-article-1.1980680 Link to comment Share on other sites More sharing options...
Uccmal Posted October 21, 2014 Share Posted October 21, 2014 I think everyone should stay away from SHLD until ESL gives up the retail and turn it into an investment vehicle... if not just be prepare to keep pumping more money into it.. If the small investors run out of money first, then the bigger portion of the pie will go to ESL and whoever keeps paying for a bigger piece. Now there is an idea. Sit back and wait for Eddie to turn Sears into an investment vehicle if there is anything left to turn. Then we will actually know what he is doing, and he might too, for a change. Link to comment Share on other sites More sharing options...
Uccmal Posted October 21, 2014 Share Posted October 21, 2014 This should help the balance sheet going forward..sheesh http://m.nydailynews.com/news/crime/woman-steals-3-7-million-goods-sears-warehouse-article-1.1980680 Jeez, they should hire her as CEO. They need someone with a bit of retailing skill. This just shows the absolute ineptitude of the SHLD organization, and its senior manager. Link to comment Share on other sites More sharing options...
oddballstocks Posted October 21, 2014 Share Posted October 21, 2014 This should help the balance sheet going forward..sheesh http://m.nydailynews.com/news/crime/woman-steals-3-7-million-goods-sears-warehouse-article-1.1980680 They need to promote her! Here is someone in the organization who figured out a way to finally quickly liquidate the inventory. Seems they know the Sears target market pretty well too. Only a $50k bond, I'm sure Eddie can do a rights offering to raise cash to bail her out.. Link to comment Share on other sites More sharing options...
LC Posted October 21, 2014 Share Posted October 21, 2014 Detail of reported theft: $3.6 million of fake moustaches (book value $14.50) and a single $100,000 HDMI cord Edit: Also apparently stolen were 4 Kmart stores. Book value $14.95. Link to comment Share on other sites More sharing options...
HeresyValue Posted October 21, 2014 Share Posted October 21, 2014 A SHLD investor is like the guy jumping off the 100 story building. yes , investor will feel the rush of air, exhilaration etc. Sooner or later, he will have his tryst with destiny (concrete). Around the 10th story, the investor will find that the air in safety cushion was long gone. On a completely unrelated note... Why do I even bother reading CbF anymore... :S it's become a glorified 'value' stockhouse board. Link to comment Share on other sites More sharing options...
Kraven Posted October 21, 2014 Share Posted October 21, 2014 Detail of reported theft: $3.6 million of fake moustaches (book value $14.50) and a single $100,000 HDMI cord Edit: Also apparently stolen were 4 Kmart stores. Book value $14.95. That's expensive stuff. To be serious now Sears has a lot of interesting stuff going on like the Burger King SYW relationship. I read in fact that Burger King is going to be offering a special meal deal where you get a Whopper, fries, drink, 20,000 SYW points and a K-Mart*. * While supplies last. The company has made assurances though that there are plenty in stock. Link to comment Share on other sites More sharing options...
Uccmal Posted October 21, 2014 Share Posted October 21, 2014 A SHLD investor is like the guy jumping off the 100 story building. yes , investor will feel the rush of air, exhilaration etc. Sooner or later, he will have his tryst with destiny (concrete). Around the 10th story, the investor will find that the air in safety cushion was long gone. On a completely unrelated note... Why do I even bother reading CbF anymore... :S it's become a glorified 'value' stockhouse board. Indeed, but were so much more creative here.... Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now