SHLDQ - Sears Holdings Corp

[ScottHall]

Sears Achieves “Genius Status” for its Work in the Digital Space

http://blog.searsholdings.com/inside-shc/sears-achieves-genius-status-for-its-work-in-the-digital-space/

 

Yeah, okay.

[Luke 532]

Sears Achieves “Genius Status” for its Work in the Digital Space

http://blog.searsholdings.com/inside-shc/sears-achieves-genius-status-for-its-work-in-the-digital-space/

 

Yeah, okay.

 

Did you even bother to read the article it linked to, or do you subscribe to the halo effect philosophy of "there's nothing SHLD could ever possibly do well no matter what"?

 

Here's some more from that article...

"As far as being a tarnished brand, monthly searches for Sears show the brand is still top of mind. It was one of the most searched-for brands in the Index, followed by Nordstrom." http://www.l2thinktank.com/sears-surprises-as-genius-in-l2%E2%80%99s-digital-iq-index/2014/blog

 

http://www.l2thinktank.com/wp-content/uploads/2014/09/department-stores-2014-brand-term-average-monthly-searches-1024x727.jpg

[oddballstocks]

Sears Achieves “Genius Status” for its Work in the Digital Space

http://blog.searsholdings.com/inside-shc/sears-achieves-genius-status-for-its-work-in-the-digital-space/

 

Yeah, okay.

 

Did you even bother to read the article it linked to, or do you subscribe to the halo effect philosophy of "there's nothing SHLD could ever possibly do well no matter what"?

 

Here's some more from that article...

"As far as being a tarnished brand, monthly searches for Sears show the brand is still top of mind. It was one of the most searched-for brands in the Index, followed by Nordstrom." http://www.l2thinktank.com/sears-surprises-as-genius-in-l2%E2%80%99s-digital-iq-index/2014/blog

 

http://www.l2thinktank.com/wp-content/uploads/2014/09/department-stores-2014-brand-term-average-monthly-searches-1024x727.jpg

 

I'm presuming you understand how these "tech research" firms work right?  Companies pay them to be included in the report, the more the pay the higher the rankings.  This is true of Gardner, Forester and others.  This is THE standard practice in the IT industry.  Presumably Sears paid L2.  They payments are often in the form of consulting services.  So Sears might have paid for 1000 hours of L2's consulting services and amazingly L2 ranks Sears.  This is a very well known practice in the industry.  The Gardner magic quadrant is the best example of the gaming, players will out gun each other for better rankings.

 

I worked for a company that was trying for a specific Gardner spot.  I remember we hired one of their consultants for x hours and brought him in and gave him this huge presentation on why we deserve a spot in the quadrant in a certain position.  The consultant argued that we'd be better placed somewhere else.  They went back and forth before deciding where an optimal placing might be.  The executives considered it money very well spent.  They sent copies of the magic quadrant to all of their clients and prospects.  Of course clients never knew they paid for the specific positioning..

[Luke 532]

Companies pay them to be included in the report, the more the pay the higher the rankings.

 

I would question the likelihood of a guy spending good money on a frivolous report when in the past he wouldn't even waste $2 million on lighting in stores.

[oddballstocks]

Companies pay them to be included in the report, the more the pay the higher the rankings.

 

I would question the likelihood of a guy spending good money on a frivolous report when in the past he wouldn't even waste $2 million on lighting in stores.

 

They do spend money on some things, I get their ads in the mail weekly.  I would classify this as a marketing expense.  If you drill down to L2 you'll notice it's a subscription based company.  So clearly Sears is subscribing, otherwise they wouldn't be included.  They write about members.

 

While lighting doesn't get people in the door (although I'd disagree) clearly someone at the company saw it fit to pay for this.

[oddballstocks]

Companies pay them to be included in the report, the more the pay the higher the rankings.

 

I would question the likelihood of a guy spending good money on a frivolous report when in the past he wouldn't even waste $2 million on lighting in stores.

 

I guess another thought is just because you can't believe they wouldn't pay for this doesn't mean they didn't.  This is how the industry works.  Call L2 and ask.  Call an pretend you're a retailer and see what they say, it would validate my claim.

 

These guys are like the penny stock research companies.  Just because something appears on the internet doesn't mean it's true..

[Luke 532]

I would classify this as a marketing expense.

 

Yeah, I could see that.  It does get them a bit of exposure.

[JAllen]

Lampert lends SHLD $400M

 

 

http://www.sec.gov/Archives/edgar/data/1310067/000131006714000031/0001310067-14-000031-index.htm

[morningstar]

Lampert lends SHLD $400M

 

 

http://www.sec.gov/Archives/edgar/data/1310067/000131006714000031/0001310067-14-000031-index.htm

 

Now that's an interest rate... yikes... 1st lien secured debt funding around ~10% yield

[TwoCitiesCapital]

Lampert lends SHLD $400M

 

 

http://www.sec.gov/Archives/edgar/data/1310067/000131006714000031/0001310067-14-000031-index.htm

 

So financing via real estate is coming into play now - you can be sure it's going to be the 25 of the best properties securing this loan.

 

What happens if SHLD is unable to repay? Kind of puts Lampert in a position that may not be favorable to stock holders, no?

[stevevri]

The Loan is scheduled to mature on December 31, 2014, but as long as there is no event of default, the maturity date can be extended to February 28, 2015

 

Why so weirdly short term?

[compoundinglife]

The Loan is scheduled to mature on December 31, 2014, but as long as there is no event of default, the maturity date can be extended to February 28, 2015

 

Why so weirdly short term?

 

Cover the bill for invetory ramp up for holiday season and then repay after they have presumably sold said inventory?

[alertmeipp]

Eddie just pocketed about 7 millions in fee.

 

This should put near term liquidity issue into dealth.

 

Hope they can sell sears Canada by then.

 

[Picasso]

The Loan is scheduled to mature on December 31, 2014, but as long as there is no event of default, the maturity date can be extended to February 28, 2015

 

Why so weirdly short term?

 

Cover the bill for invetory ramp up for holiday season and then repay after they have presumably sold said inventory?

 

If this does not make the SHLD story clear, I don't know what will.

 

How is he supposed to unlock the value in the top 25 properties when he has borrowed against them to invest back into the crappy retail business? 

 

Even better is the cool 32 million or so that will flow back into Lamperts pocket from SHLD to do this deal.  If investing in retail was so great and given his large stake in the equity, why does he need to put these kinds of terms on the loan?  I think it would say a lot for the stock if he made an unsecured loan versus needing so much protection for only a year.

 

It really seems to me like Lampert wants the stock price lower.  This is the totally wrong signal to make to the market if one were more positive on the company.

[alertmeipp]

I think lvs and mnkd di similar things with owner.

 

This is nothing much than a bridge loan.  Hopefully,  the bridge needs to some where.

[heth247]

Even better is the cool 32 million or so that will flow back into Lamperts pocket from SHLD to do this deal.  If investing in retail was so great and given his large stake in the equity, why does he need to put these kinds of terms on the loan?  I think it would say a lot for the stock if he made an unsecured loan versus needing so much protection for only a year.

 

It really seems to me like Lampert wants the stock price lower.  This is the totally wrong signal to make to the market if one were more positive on the company.

 

How did you get the "32MM" number?  The loan has a base annual interest of 5% + a 1.75% upfront fee (7MM). Assume it is paid off at 12/31/2014, SHLD only will pay 5MM in interest. So the total is 5+7= 12MM.

 

[krazeenyc]

The Loan is scheduled to mature on December 31, 2014, but as long as there is no event of default, the maturity date can be extended to February 28, 2015

 

Why so weirdly short term?

 

Cover the bill for invetory ramp up for holiday season and then repay after they have presumably sold said inventory?

 

If this does not make the SHLD story clear, I don't know what will.

 

How is he supposed to unlock the value in the top 25 properties when he has borrowed against them to invest back into the crappy retail business? 

 

Even better is the cool 32 million or so that will flow back into Lamperts pocket from SHLD to do this deal.  If investing in retail was so great and given his large stake in the equity, why does he need to put these kinds of terms on the loan?  I think it would say a lot for the stock if he made an unsecured loan versus needing so much protection for only a year.

 

It really seems to me like Lampert wants the stock price lower.  This is the totally wrong signal to make to the market if one were more positive on the company.

 

I agree he should loan Sears $400M at 1% for the good of the shareholders. If i was a LP in his fund I'd have no issue with that at all.

[heth247]

How did you get the "32MM" number?  The loan has a base annual interest of 5% + a 1.75% upfront fee (7MM). Assume it is paid off at 12/31/2014, SHLD only will pay 5MM in interest. So the total is 5+7= 12MM.

 

I don't know about others, but this actually seems an attractive short term financing to me, provided to SHLD by ESL.

 

Just imaging what if they have to go to the street to raise 400MM, what interest rate and fee, they may get... given their credit ratings for now.

[Picasso]

How did you get the "32MM" number?  The loan has a base annual interest of 5% + a 1.75% upfront fee (7MM). Assume it is paid off at 12/31/2014, SHLD only will pay 5MM in interest. So the total is 5+7= 12MM.

 

I don't know about others, but this actually seems an attractive short term financing to me, provided to SHLD by ESL.

 

Just imaging what if they have to go to the street to raise 400MM, what interest rate and fee, they may get... given their credit ratings for now.

 

I don't know if the cost would have been more on Wall Street.  The 2018 inventory secured bonds are yielding right around where these priced. 

 

My 32 million figure is based on the one year extension.  My guess if they need the money now they will need it just as much in a year and why pay the placement fee twice when you can just extend.

[heth247]

I don't know if the cost would have been more on Wall Street.  The 2018 inventory secured bonds are yielding right around where these priced. 

 

My 32 million figure is based on the one year extension.  My guess if they need the money now they will need it just as much in a year and why pay the placement fee twice when you can just extend.

 

Where in the filing do they allow for one-year extension? The loan can be extended to Feb 28, 2015.

[peridotcapital]

"The loan helps meet the company’s previously announced goal of raising $1 billion in liquidity this year, Howard Riefs, a spokesman, said in an e-mail."

 

Oh the spin machine turns it up a gear. Getting a loan from Eddie when your revolver capacity runs dry is considered "raising liquidity." Looks like there were no real serious takers for Auto Centers or Canada. Not that we should be surprised.

 

On the positive side, I will point out that $400M secured by 25 properties does not imply that these are the best properties. Their crown jewels (the 40 or so stores in the top 100 malls) are worth far more than $16M each. These are middle of the road properties most likely, just like the 125 REMIC stores.

[Luke 532]

I don't know if the cost would have been more on Wall Street.  The 2018 inventory secured bonds are yielding right around where these priced. 

 

My 32 million figure is based on the one year extension.  My guess if they need the money now they will need it just as much in a year and why pay the placement fee twice when you can just extend.

 

Where in the filing do they allow for one-year extension? The loan can be extended to Feb 28, 2015.

 

~3 month loan, can be extended for additional 2 months for total of ~5 months

[krazeenyc]

"The loan helps meet the company’s previously announced goal of raising $1 billion in liquidity this year, Howard Riefs, a spokesman, said in an e-mail."

 

Oh the spin machine turns it up a gear. Getting a loan from Eddie when your revolver capacity runs dry is considered "raising liquidity." Looks like there were no real serious takers for Auto Centers or Canada. Not that we should be surprised.

 

On the positive side, I will point out that $400M secured by 25 properties does not imply that these are the best properties. Their crown jewels (the 40 or so stores in the top 100 malls) are worth far more than $16M each. These are middle of the road properties most likely, just like the 125 REMIC stores.

 

+1. (although nobody wanted Lands End either).

[davidoosnk]

"The loan helps meet the company’s previously announced goal of raising $1 billion in liquidity this year, Howard Riefs, a spokesman, said in an e-mail."

 

Oh the spin machine turns it up a gear. Getting a loan from Eddie when your revolver capacity runs dry is considered "raising liquidity." Looks like there were no real serious takers for Auto Centers or Canada. Not that we should be surprised.

 

On the positive side, I will point out that $400M secured by 25 properties does not imply that these are the best properties. Their crown jewels (the 40 or so stores in the top 100 malls) are worth far more than $16M each. These are middle of the road properties most likely, just like the 125 REMIC stores.

 

+1. (although nobody wanted Lands End either).

 

I don't think it's wise to stipulate on what is happening behind the scenes, if anything. Too many variables at play and interconnected parties. Deals can be made where an event like this is part of the deal based on a handshake. It also bears mentioning that given the small float, ESL and Berkowitz could easily take SHLD private. Or play with a  host of derivatives tied to the stock price in a fashion most observers of this board could hardly fathom.

 

Logic on Wall Street does not follow the same rules as for the small businessman.

 

Something very interesting happened in 2008 when Accredited Home Lenders, a mortgage lender, was about to go BK. A hedge fund, Loan Star Capital, bought it at a multiple of the current price (even after renegotiating on price). Stock price had been around $4 and deal was eventually closed at $11.75 http://www.reuters.com/article/2007/10/12/us-accreditedhome-idUSWNAS622320071012

 

I speculate that there was more to this purchase than meets the eye.

 

Now, if a hedge fund can find it in their interest to buy a nearly defunct smallish entity like Accredited with limited assets, and Carl Icahn finds value in a ridiculous company like Herbalife, methinks it might be a tad early to view a reasonable loan like this as a sign that there are no forthcoming deals that will be accretive to SHLD shareholders. Particularly when we are looking at  company that owns a ton of real estate that is illiquid and can be ascribed a value that makes sense to whoever stands to gain the most from it. Not to mention other obvious Wall Street shenanigans. The interested parties have too much to lose, and can too easily influence the stock price to let it drift to zero. IMO

 

In sum, I'm just cautioning that the negative theses on this board seem a tad too sure of themselves, kind of a reverse situation to earlier this year when the price was at $60 and many longs were seeing $150 a few months out...

 

 

 

 

 

 

[constructive]

Something very interesting happened in 2008 when Accredited Home Lenders, a mortgage lender, was about to go BK. A hedge fund, Loan Star Capital, bought it at a multiple of the current price (even after renegotiating on price). Stock price had been around $4 and deal was eventually closed at $11.75 http://www.reuters.com/article/2007/10/12/us-accreditedhome-idUSWNAS622320071012

 

I speculate that there was more to this purchase than meets the eye.

 

You don't need to speculate. Lone Star made a stupid $300M mistake and AHL went bankrupt a year and a half later.