Kraven Posted December 24, 2014 Share Posted December 24, 2014 Keeping with the season, I thought I would provide a ray of sunshine for all members of the Sears brigade. As a kid in the early 70's my mom used to bring home each year around November or early December the holiday Sears catalog. It was the size of a phone book and could break a toe if dropped. In those pre-internet days, it seemingly had every toy under the sun. If it wasn't in the Sears catalog, it might as well not exist. My brother and I would pore over it like it held the secrets to the universe. I remember choosing some great stuff out of there. I got an Evel Knievel stunt cycle that you wound up and it would fly across the driveway doing wheelies. We got a Green Machine (a cousin to the Big Wheel). I never did get a Stretch Armstrong though. The Sears by us also for a short time had a small arcade they buried in the back in the early 80's video game craze. It was the only place by me that had Star Castle which was a game I liked. What I didn't like was that to get there, you had to walk through the Toughskin clothing section (which apparently still exists). All the kids lived in mortal fear that they would be forced to wear Toughskins. It was a very uncool brand in the days of Lightning Bolt, Ocean Pacific, etc. I can just imagine the horror of some kid today whose mom, along the lines of some of the other posters here, ordered him some Toughskin clothes only to find that 2x or 3x the order arrived at home. Link to comment Share on other sites More sharing options...
Jurgis Posted December 24, 2014 Share Posted December 24, 2014 So their associates ended up charging customers for repairs they didn't need. OT. Isn't that what auto mechanics do all the time? :-\ Link to comment Share on other sites More sharing options...
20ppy Posted January 1, 2015 Share Posted January 1, 2015 http://www.cnbc.com/id/102303436 Malls are transforming themselves slowly but surely… Link to comment Share on other sites More sharing options...
BTShine Posted January 7, 2015 Share Posted January 7, 2015 http://blogs.wsj.com/developments/2015/01/06/retail-rents-rise-in-fourth-quarter/?KEYWORDS=sears# Some upbeat commentary on malls and mall lease rates. Link to comment Share on other sites More sharing options...
valuestudent Posted January 8, 2015 Share Posted January 8, 2015 I am not sure if this was addressed anywhere else. In this loan document at the very end, there is Exhibit B. It lists some stores as having some amendments. Is it wrong to assume that these stores appear on the list of stores providing collateral for the debt? http://www.sec.gov/Archives/edgar/data/1310067/000131006714000043/shldex101q32014.htm Link to comment Share on other sites More sharing options...
jeffmori7 Posted January 8, 2015 Share Posted January 8, 2015 Sears investing in 200 stores to add some smart home stuff in display: http://www.consumerreports.org/cro/news/2015/01/sears-has-big-plans-for-the-connected-home/index.htm Link to comment Share on other sites More sharing options...
smj Posted January 9, 2015 Share Posted January 9, 2015 I am not sure if this was addressed anywhere else. In this loan document at the very end, there is Exhibit B. It lists some stores as having some amendments. Is it wrong to assume that these stores appear on the list of stores providing collateral for the debt? http://www.sec.gov/Archives/edgar/data/1310067/000131006714000043/shldex101q32014.htm yes, these are definitely the collateral for the loan and from a quick look at the locations these are some of the most valuable properties Link to comment Share on other sites More sharing options...
texual Posted January 10, 2015 Share Posted January 10, 2015 Can we wax nostalgic for the times when Eddie Lampert wrote enormous letters with book reccs and philosophy, the massive texts were amazing. I secretly hope he does it again but the last few years have been so boring. What happened to those famous 10 page reads? Does anyone else feel like those were cool? I might be the only one. Link to comment Share on other sites More sharing options...
Liberty Posted January 12, 2015 Share Posted January 12, 2015 Anecdote: Trying to buy a sleigh for the kid on Sears.ca because they had the best price on that particular item. I can't buy it. Either there's a bug in their system that prevents me from completing checkout (price of item goes to zero and it says it's not available anymore), or there's a bug in their inventory system that says the item is 'in stock' on the site but it really isn't (by they don't offer me to order it anyway and way, or say how long it'll be until they have more). I'm basically hitting a brick wall while trying to buy this thing from Sears... Now looking elsewhere. Link to comment Share on other sites More sharing options...
BTShine Posted January 13, 2015 Share Posted January 13, 2015 Are the Sears shorts quitting? We are at the lowest short interest in over a year with 12.8 million shares sold short. Link to comment Share on other sites More sharing options...
valueinvestor82 Posted January 13, 2015 Share Posted January 13, 2015 It's still above a "healthy () 60% right? That should still be good enough for a nice short squeeze. Sears is always good for a nice squeeze at least 1-2x a year. Bring on the REIT and hopeful spinoff of the auto business. Link to comment Share on other sites More sharing options...
krazeenyc Posted January 15, 2015 Share Posted January 15, 2015 Anyone here following what's going on at Caesars? I think it might be illuminating! http://www.bloomberg.com/news/2015-01-15/caesars-letting-apollo-tpg-keep-1-8-billion-fuels-creditor-ire.html http://www.bloomberg.com/video/caesars-bankruptcy-sets-up-showdown-with-dissident-creditors-JAdBvolzRsC_4H9M_259TQ.html http://www.bloomberg.com/video/caesars-bankruptcy-apollo-tpg-beat-the-house-8DKEHXU4Q3u82_XySAyodw.html Maybe Sears equity holders might find whatever happens at Caesars to be very valuable going forward. Also has anyone noticed the price of the SHLD 8% notes due 12/15/2019??! Am I getting a bad quote? are they trading almost at par? Looks like the Sears Holdings 8% 2019 notes are trading 97-98 cents on the dollar vs the SRAC 6.875% 2017 Notes trading at 74-75 cents on the dollar. Link to comment Share on other sites More sharing options...
Scudbucket Posted January 16, 2015 Share Posted January 16, 2015 Haven't checked in a couple of weeks, but it sounds right to me. As long as the warrants are in the money, since the bonds can be used to exercise the warrants, they should trade close to par. If the bonds ever traded down significantly and the warrants were in the money, there would be an arbitrage opportunity (buy bonds below face, buy warrants, use $500 par bonds to exercise warrants). Anyone disagree with this thinking? Link to comment Share on other sites More sharing options...
BTShine Posted January 16, 2015 Share Posted January 16, 2015 Is anyone else surprised we haven't seen a Q4 SSS release from SHLD yet? Every year since the merger SHLD has released their Q4 holiday numbers in early January (or late Dec in 2011). Might have just been wishful thinking on my part that we would see the numbers this week. Link to comment Share on other sites More sharing options...
adesigar Posted January 16, 2015 Share Posted January 16, 2015 Haven't checked in a couple of weeks, but it sounds right to me. As long as the warrants are in the money, since the bonds can be used to exercise the warrants, they should trade close to par. If the bonds ever traded down significantly and the warrants were in the money, there would be an arbitrage opportunity (buy bonds below face, buy warrants, use $500 par bonds to exercise warrants). Anyone disagree with this thinking? I disagree with this. Using approx. numbers Stock is $34 options are $20.5 17.6 warrants per $500 bond current price of 17.6 shares of stock is 17.6 x 34 = 598.4 if you buy SHLDW at current price 17.6 x 20.5 = 360.8 then to make money the bond would have to trade at 598.4 - 360.8 = 237.6 if you buy the bond for $480 then SHLDW would have to trade for $6.72 Link to comment Share on other sites More sharing options...
benhacker Posted January 16, 2015 Share Posted January 16, 2015 If the bonds ever traded down significantly and the warrants were in the money, there would be an arbitrage opportunity (buy bonds below face, buy warrants, use $500 par bonds to exercise warrants). Anyone disagree with this thinking? Scud, exactly what adesigar said. The bonds have a great feature of being able to trade/excercise at par, but that trade is like a prison cell... in order to get that value out of the bond, you have to forfeit the time value of the warrants which is large. So where's the free bargain? I think the bonds should carry a *slight* premium because of the feature, but by slight I mean maybe 1-2% premium. The bond pricing amongst the Sears credits is completely wacky. The only (fundamental) implication by holdco debt trading so much better than SRAC debt is that market participants think that there is huge value at Sears Re *and* that sometime after 2019 but before 2027 Sears will file for BK. SRAC already has claim to KCD IP and the REMIC properties, so I can't see the holdco Debt having a stronger standing than SRAC even though it trades at 2x the price (Moody's agrees, and rates the SRAC higher than holdco debt). I really can't see the price of SHLDW and the SRAC long debt trading at mid 50's without laughing out loud. The implication of a high likelihood of a huge value to Sears common above $28 (enough that paying $15 of time value makes sense) along with a high probability of Ch 11 + huge impairment to SRAC makes zero sense. Perhaps I am missing something, but I think it's just a wacky market. Sears may be doomed, but the common and the debt should get on the same page in terms of the chances of that... Ben PS - Side note that SRAC has <$300m debt outstanding, and I'm pretty sure the personal permanent loss to ESL's Sears stake would be impaired by more than $300m if a subsidiary of Sears filed (in absence of a larger entity level Ch 11) - think negative sales / brand impact, etc at SHOS, SHLD, creditor / factor pain, etc. I think ESL will tender for SRAC debt if it stays here... market value of SRAC debt is <$200m. Link to comment Share on other sites More sharing options...
krazeenyc Posted January 16, 2015 Share Posted January 16, 2015 If the bonds ever traded down significantly and the warrants were in the money, there would be an arbitrage opportunity (buy bonds below face, buy warrants, use $500 par bonds to exercise warrants). Anyone disagree with this thinking? Scud, exactly what adesigar said. The bonds have a great feature of being able to trade/excercise at par, but that trade is like a prison cell... in order to get that value out of the bond, you have to forfeit the time value of the warrants which is large. So where's the free bargain? I think the bonds should carry a *slight* premium because of the feature, but by slight I mean maybe 1-2% premium. The bond pricing amongst the Sears credits is completely wacky. The only (fundamental) implication by holdco debt trading so much better than SRAC debt is that market participants think that there is huge value at Sears Re *and* that sometime after 2019 but before 2027 Sears will file for BK. SRAC already has claim to KCD IP and the REMIC properties, so I can't see the holdco Debt having a stronger standing than SRAC even though it trades at 2x the price (Moody's agrees, and rates the SRAC higher than holdco debt). I really can't see the price of SHLDW and the SRAC long debt trading at mid 50's without laughing out loud. The implication of a high likelihood of a huge value to Sears common above $28 (enough that paying $15 of time value makes sense) along with a high probability of Ch 11 + huge impairment to SRAC makes zero sense. Perhaps I am missing something, but I think it's just a wacky market. Sears may be doomed, but the common and the debt should get on the same page in terms of the chances of that... Ben PS - Side note that SRAC has <$300m debt outstanding, and I'm pretty sure the personal permanent loss to ESL's Sears stake would be impaired by more than $300m if a subsidiary of Sears filed (in absence of a larger entity level Ch 11) - think negative sales / brand impact, etc at SHOS, SHLD, creditor / factor pain, etc. I think ESL will tender for SRAC debt if it stays here... market value of SRAC debt is <$200m. I was trying to illuminate the huge difference in price between the SHLD 8% 2019 vs the SRAC 6.875% 2017. Can we speculate on some of the reasons the price disparity exists? I'm purely speculating here: 1. Odd supply and demand characteristics for 8% 2019 notes -- as close to 80% are owned by ESL and BB. (Kraven -- notice no use of E.... and B....) 2. Investors want to own the debt also owned by ESL and BB. 3. People might be speculating that what is happening at Caesars could also happen with SHLD and SRAC. Ben do you own the SRAC debt? FWIW, I expected the 2019 8% notes to trade at a premium to the SRAC, but not this wide of a margin -- and not near par. Link to comment Share on other sites More sharing options...
benhacker Posted January 16, 2015 Share Posted January 16, 2015 Krazee, 1. Odd supply and demand characteristics for 8% 2019 notes -- as close to 80% are owned by ESL and BB. (Kraven -- notice no use of E.... and B....) 2. Investors want to own the debt also owned by ESL and BB. 3. People might be speculating that what is happening at Caesars could also happen with SHLD and SRAC. Ben do you own the SRAC debt? FWIW, I expected the 2019 8% notes to trade at a premium to the SRAC, but not this wide of a margin -- and not near par. #1 - I could see this and the warrant exchange effect, adding a bit. #2 - Maybe, I doubt it though... their common stake is so much larger... but a good thought at least. #3 - I haven't followed as closely... I don't see Ch 11 shenanigans being compatible with bonds trading near par. Even if participants thought they would be made whole, I think they wouldn't pay up prior to a filing. Too much uncertainty (right?). When comparing to the '17 SRAC debt, I can't see a lot of reasons beyond those... I do own SRAC debt (I mostly own SSRAP, but also some '28+ OTC issues directly - SSRAP has it's own risks, but trades cheap to the underlying - I've debated on picking up the '17 issue, I like the near term catalyst). I have for a very long time. My basis on cost is probably low $40's (not counting interest) which may color my view (I don't think so, but I figured I would disclose). I think rational prices for the debt given information today would be (just some rough #'s from the gut): '17 SRAC --> $85-90 '18 HoldCo (secured) --> $90-95 '19 HoldCo (unsecured) --> $85-90 SRAC ('27+) --> $70-75 It just seems like dramatically different assumptions are going into the pricing for each piece of the Sears capital structure, it's really quite strange. However, I think an arb is hard as most of this stuff is illiquid, hard to borrow, or requires huge margin to short (or all of the above!). Link to comment Share on other sites More sharing options...
grasshopper Posted January 17, 2015 Share Posted January 17, 2015 Random comment. I run an e-commerce store on the side and we also have a rewards points program, something like SYW. I've read through this thread and a lot of people complain a lot about the high spending on points and stuff on SYW but I just thought about it some more about how I view my points. SYW points are a form of float for Eddie... You give them out, and they are a liability to you because they can be redeemed. You have a huge universe of point holders (some die hard point collectors like FF point collectors, some apathetic people who will forget about them) some of whom will redeem and many of whom will not. Some will even just hoard the points for a long time. In a way, the company can use this to build "float" by having a ton of cash in which to invest that is promised to the point holders for savings on other items. I haven't dug into the details on how SHLD notes this liability, I think they expense it all up front, but it is in a way, a form of float is it not? Just trying to think why he loves SYW so much.... Link to comment Share on other sites More sharing options...
Borgesian Posted January 21, 2015 Share Posted January 21, 2015 http://basehitinvesting.com/sears-and-seven-foot-hurdles/ Link to comment Share on other sites More sharing options...
chetster Posted January 21, 2015 Share Posted January 21, 2015 I found this article mildly interesting. http://www.scdigest.com/ONTARGET/15-01-21-1.PHP?cid=8897&ctype=content Title: "Supply Chain News: Sears Holdings Builds Its Own DOM Solution, Increases eFufillment Capacity, Avoids Costly CapEx Investment" Link to comment Share on other sites More sharing options...
wisdom Posted January 21, 2015 Share Posted January 21, 2015 http://www.bloomberg.com/news/2015-01-21/berkadia-ceo-sees-u-s-property-as-hot-space-amid-global-shocks.html?cmpid=yhoo Link to comment Share on other sites More sharing options...
BTShine Posted January 21, 2015 Share Posted January 21, 2015 Two significant happenings at SHLD properties: Woodfield Mall sublease - http://www.chicagobusiness.com/article/20150120/NEWS07/150129993/pac-man-themed-restaurant-coming-to-sears-woodfield-space According to the Baker Street report this property would lease for ~$40/sq. ft. They are leasing out 40,000 sq. ft. of storage room space. Cherry Creek Mall store closing and immediate renovation plans announced by landlord AmCap (did SHLD sell back their lease?)- http://www.9news.com/story/news/local/2015/01/20/sears-store-demolished/22045723/ Link to comment Share on other sites More sharing options...
Luke 532 Posted January 21, 2015 Share Posted January 21, 2015 Two significant happenings at SHLD properties: Woodfield Mall sublease - http://www.chicagobusiness.com/article/20150120/NEWS07/150129993/pac-man-themed-restaurant-coming-to-sears-woodfield-space According to the Baker Street report this property would lease for ~$40/sq. ft. They are leasing out 40,000 sq. ft. of storage room space. Cherry Creek Mall store closing and immediate renovation plans announced by landlord AmCap (did SHLD sell back their lease?)- http://www.9news.com/story/news/local/2015/01/20/sears-store-demolished/22045723/ Nice find, BT. Link to comment Share on other sites More sharing options...
jeffmori7 Posted January 21, 2015 Share Posted January 21, 2015 A quick check on http://www.shcrealty.com/ shows that there are 3077 operating store opportunities and 120 closed store opportunities. It appears that while Sears are closing a lot of store, they have difficulties selling, leasing, subleasing, transforming them at the same pace. So except for leases not renewed, the story is not always over once the closure or transformation is announced. we should try to keep track of those numbers over time. More than one month later..they are at 3075 operating store opportunities and 117 closed store opportunities...so it is going down..but really slowly. Operating store opportunities down to 3018, while closed are up to 119 opportunities. 7/18/2014... operating opps: 2968, closed opps: 136 On 9/05/2014, numbers are going down a bit : operating opps: 2954, closed opps: 132 A little update: operating opportunities : 2873, closed opportunities : 195, so a net change of 18 since beginning of september. Update on January 21st, 2015: 2742 operating store opportunities and 210 closed store opportunities. Link to comment Share on other sites More sharing options...
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