SHLDQ - Sears Holdings Corp

[ScottHall]

Anybody care to hypothesize on a reasonable "worst case" price the debt (from the rights offering) will trade at in the first few weeks?  I know anything is possible, but I'm interested to hear what everybody has to say.  I think it was Picasso who said 85 cents on the dollar?  Thanks in advance for your comments.

 

Well, you can work the way backwards from the warrant pricing. With SHLD at $35.50 and implied volatility of 55%, the warrants theoretically should trade around $19. You'll get 17.6 warrants for each right. So, in the end, you're paying $685 to get a $500 bond and $335 worth of warrants. So, actually you're paying $350 for $500 nominal or $0.70 on the dollar. This pricing is kind of nuts and only explainable by selling pressure (who really wants to own SHLD bonds and warrants?).

 

I don't think that pricing is nuts by any means. The 2018 secured debt is trading in the low 90's and the 2017 unsecured debt is trading in the low 70's. Why wouldn't unsecured 2019 debt trade around 70 cents?

 

I believe the 2017 debt you're referring to are the SRACs. Different spot in the capital structure - IIRC can only really look to Sears for repayment.

 

Structural subordination aside these are Holdings notes, so you might be able to find value a lot more places even though they aren't guaranteed by the subsidiaries.

 

Just a thought. Haven't looked too closely at this one in a while.

 

Yes, but Sears is the entity that owns the real estate, so there is a lot there to cover the debt. With the first lien HoldCo notes trading in the low 90's, I can't see the second lien debt trading at a similar price. I'd be surprised if the YTM was not in the double-digits.

 

I don't have any opinion about where these things will price out at. Was just sharing a possible reason why they may not trade as cheap as the SRACs.

 

One other thing is that the other Holdings notes are second lien to the inventory + receivables and this won't have a lien at all.

 

Again, not speculating regarding what they'll price at. Just thoughts on reasons why they may not.

 

 

EDIT: Meant to say "why they may not price in line with the SRACs." Sorry.

[krazeenyc]

Anybody care to hypothesize on a reasonable "worst case" price the debt (from the rights offering) will trade at in the first few weeks?  I know anything is possible, but I'm interested to hear what everybody has to say.  I think it was Picasso who said 85 cents on the dollar?  Thanks in advance for your comments.

 

Well, you can work the way backwards from the warrant pricing. With SHLD at $35.50 and implied volatility of 55%, the warrants theoretically should trade around $19. You'll get 17.6 warrants for each right. So, in the end, you're paying $685 to get a $500 bond and $335 worth of warrants. So, actually you're paying $350 for $500 nominal or $0.70 on the dollar. This pricing is kind of nuts and only explainable by selling pressure (who really wants to own SHLD bonds and warrants?).

 

I don't think that pricing is nuts by any means. The 2018 secured debt is trading in the low 90's and the 2017 unsecured debt is trading in the low 70's. Why wouldn't unsecured 2019 debt trade around 70 cents?

 

XXX

EDIT: IGNORE Brain fart .... lol

 

[krazeenyc]

Almost forgot this: Add to that any rights you might get for "free" by oversubscribing the offering.

 

should be miniscule.

[morningstar]

Anybody care to hypothesize on a reasonable "worst case" price the debt (from the rights offering) will trade at in the first few weeks?  I know anything is possible, but I'm interested to hear what everybody has to say.  I think it was Picasso who said 85 cents on the dollar?  Thanks in advance for your comments.

 

Well, you can work the way backwards from the warrant pricing. With SHLD at $35.50 and implied volatility of 55%, the warrants theoretically should trade around $19. You'll get 17.6 warrants for each right. So, in the end, you're paying $685 to get a $500 bond and $335 worth of warrants. So, actually you're paying $350 for $500 nominal or $0.70 on the dollar. This pricing is kind of nuts and only explainable by selling pressure (who really wants to own SHLD bonds and warrants?).

 

I don't think that pricing is nuts by any means. The 2018 secured debt is trading in the low 90's and the 2017 unsecured debt is trading in the low 70's. Why wouldn't unsecured 2019 debt trade around 70 cents?

 

the 2017 unsecured has a 6.875% coupon (if i'm not mistaken) So it's trading at roughly a 10% yield right? Given that ESL will own a large slice of the new notes you would think that the 2019 notes should trade at a 10% yield or lower. So I think at worst the notes would be trading 80 cents on the dollar.

 

The 2017 unsecureds (which are SRAC bonds as mentioned above) traded today at 73 to yield about 19%, not 10%. I don't think its out of the question for the new notes to trade around 15% yield (in the high 70s).

[krazeenyc]

Anybody care to hypothesize on a reasonable "worst case" price the debt (from the rights offering) will trade at in the first few weeks?  I know anything is possible, but I'm interested to hear what everybody has to say.  I think it was Picasso who said 85 cents on the dollar?  Thanks in advance for your comments.

 

Well, you can work the way backwards from the warrant pricing. With SHLD at $35.50 and implied volatility of 55%, the warrants theoretically should trade around $19. You'll get 17.6 warrants for each right. So, in the end, you're paying $685 to get a $500 bond and $335 worth of warrants. So, actually you're paying $350 for $500 nominal or $0.70 on the dollar. This pricing is kind of nuts and only explainable by selling pressure (who really wants to own SHLD bonds and warrants?).

 

I don't think that pricing is nuts by any means. The 2018 secured debt is trading in the low 90's and the 2017 unsecured debt is trading in the low 70's. Why wouldn't unsecured 2019 debt trade around 70 cents?

 

the 2017 unsecured has a 6.875% coupon (if i'm not mistaken) So it's trading at roughly a 10% yield right? Given that ESL will own a large slice of the new notes you would think that the 2019 notes should trade at a 10% yield or lower. So I think at worst the notes would be trading 80 cents on the dollar.

 

The 2017 unsecureds (which are SRAC bonds as mentioned above) traded today at 73 to yield about 19%, not 10%. I don't think its out of the question for the new notes to trade around 15% yield (in the high 70s).

 

yeah -- total OOPS.

[Matson125]

Redevelopment of former Kmart spaces drives Albuquerque retail activity

Both locations are planned for redevelopment in 2015

 

http://www.bizjournals.com/albuquerque/news/2014/11/04/redevelopment-of-former-kmart-spaces-drives.html

 

109,000-square-foot space in the South Valley's West Central Plaza Shopping Center

Sears owns the Kmart parcel http://www.bernco.gov/property-tax-search-result-details/     

Parcel ID: 502097

 

86,500-square-foot Kmart soon to be vacated at the Hilltop Plaza development in Rio Rancho.

Space is owned by Kmart http://etweb.sandovalcountynm.gov/Assessor/taxweb/account.jsp?accountNum=R049877

 

 

 

[20ppy]

"(who really wants to own SHLD bonds and warrants?)."

 

Knowing what we know, why not? I purchased more rights just for the warrants. The notes are fine, I feel comfortable with the 8%. I don't plan to trade it.

[texual]

Is it possible that ESL could close his fund now that he needs so much financing and support from shareholders including the majority of his investment being funded by the partners? I had a pet theory years ago that he would close the fund (like WEB, but for different reasons here), distribute shares and whoever sold would drive the price down while he bought whatever he could until he was a solid 33% owner... but so far his partnership is the only thing that ensures he will be able to keep injecting capital into the company. Even if its mostly his own money being put up, I just dont see how he can keep Sears alive without the support of Bruce, Fairholme, and ESL itself.

 

Am I totally off by this logic, that he will have to keep the fund open even longer?

[zenith]

http://www.valuewalk.com/2014/11/target-corporation-close-stores/

[Luke 532]

Redevelopment of former Kmart spaces drives Albuquerque retail activity

Both locations are planned for redevelopment in 2015

 

http://www.bizjournals.com/albuquerque/news/2014/11/04/redevelopment-of-former-kmart-spaces-drives.html

 

109,000-square-foot space in the South Valley's West Central Plaza Shopping Center

Sears owns the Kmart parcel http://www.bernco.gov/property-tax-search-result-details/     

Parcel ID: 502097

 

86,500-square-foot Kmart soon to be vacated at the Hilltop Plaza development in Rio Rancho.

Space is owned by Kmart http://etweb.sandovalcountynm.gov/Assessor/taxweb/account.jsp?accountNum=R049877

 

Nice find, Matson.

[JAllen]

There are some interesting comments about SHLD in REIT transcripts.

 

E.G.:

 

"Stephen Lebovitz[/color] - President and Chief Executive OfficerHi, Craig. Well. We met with Sears recently coincidentally it was the same day that they announced their deal with Primark for 7 locations and Sears’ priority right now is dealing with K-Mart which is where a majority of their losses are occurring and with improving their businesses there. So they haven’t indicated a willingness to show more of their source like we’re able to buy last year and we bought the two at Fayette and CoolSprings. We continue to talk to them on a regular basis about opportunities, about joint ventures, about things we could do together to redevelop their stores or purchase their stores. They are depending on what’s happening. If they are on a corporate basis, then that will determine their receptivity, but right now it didn’t appear that they are inclined to sell additional stores. JCPenney has made market improvement in their business. They are not looking to close stores. Like I said, we think there is a few vulnerable locations, 3 that I mentioned in my comments. But they are headed in the right directions in terms of preserving their operations and generating growth going forward."

[/color]http://seekingalpha.com/article/2620655-cbl-and-associates-properties-cbl-ceo-stephen-lebovitz-on-q3-2014-results-earnings-call-transcript?part=single

[Luke 532]

Shop Your Way® Launches Health Information Service Giving Members Health and Wellness Support, Products and Deals

http://searsholdings.mediaroom.com/index.php?s=16310&item=137326

[Luke 532]

There are some interesting comments about SHLD in REIT transcripts.

 

E.G.:

 

"Stephen Lebovitz[/color] - President and Chief Executive OfficerHi, Craig. Well. We met with Sears recently coincidentally it was the same day that they announced their deal with Primark for 7 locations and Sears’ priority right now is dealing with K-Mart which is where a majority of their losses are occurring and with improving their businesses there. So they haven’t indicated a willingness to show more of their source like we’re able to buy last year and we bought the two at Fayette and CoolSprings. We continue to talk to them on a regular basis about opportunities, about joint ventures, about things we could do together to redevelop their stores or purchase their stores. They are depending on what’s happening. If they are on a corporate basis, then that will determine their receptivity, but right now it didn’t appear that they are inclined to sell additional stores. JCPenney has made market improvement in their business. They are not looking to close stores. Like I said, we think there is a few vulnerable locations, 3 that I mentioned in my comments. But they are headed in the right directions in terms of preserving their operations and generating growth going forward."

[/color]http://seekingalpha.com/article/2620655-cbl-and-associates-properties-cbl-ceo-stephen-lebovitz-on-q3-2014-results-earnings-call-transcript?part=single

GGP’s Mathrani Offers Bullish Take on the Mall Sector (11/6/2014)

http://nreionline.com/retail/ggp-s-mathrani-offers-bullish-take-mall-sector?NL=RET-01&Issue=RET-01_20141106_RET-01_403&sfvc4enews=42&cl=article_1&YM_RID=CPG09000002830881&YM_MID=993

 

As to Sears, although Mathrani would not speculate on Sears’ ultimate fate, claiming he would not bet against Eddie Lampert, he noted that getting real estate back from Sears would allow mall owners like GGP to subdivide the stores and lease them out at significantly higher rents.

 

“Sears is an interesting enigma,” he said. “It owns great real estate, and they pay $2 per sq. ft. on 100,000-sq.-ft. stores. So the biggest upside potential for us is to recapture that real estate.”

[Luke 532]

There are some interesting comments about SHLD in REIT transcripts.

http://seekingalpha.com/article/2620655-cbl-and-associates-properties-cbl-ceo-stephen-lebovitz-on-q3-2014-results-earnings-call-transcript?part=single

 

Don't think I'd heard about the CoolSprings development previously...

"Construction is also underway on the Sears redevelopment at CoolSprings Galleria. Cheesecake Factory is opening in November and American Girl, H&M, Belk Home and additional shops and restaurants are set to open in 2015."

http://seekingalpha.com/article/2620655-cbl-and-associates-properties-cbl-ceo-stephen-lebovitz-on-q3-2014-results-earnings-call-transcript?part=single

 

[krazeenyc]

There are some interesting comments about SHLD in REIT transcripts.

http://seekingalpha.com/article/2620655-cbl-and-associates-properties-cbl-ceo-stephen-lebovitz-on-q3-2014-results-earnings-call-transcript?part=single

 

Don't think I'd heard about the CoolSprings development previously...

"Construction is also underway on the Sears redevelopment at CoolSprings Galleria. Cheesecake Factory is opening in November and American Girl, H&M, Belk Home and additional shops and restaurants are set to open in 2015."

http://seekingalpha.com/article/2620655-cbl-and-associates-properties-cbl-ceo-stephen-lebovitz-on-q3-2014-results-earnings-call-transcript?part=single

 

CBL bought this property from Sears to redevelop themselves.

[Luke 532]

There are some interesting comments about SHLD in REIT transcripts.

http://seekingalpha.com/article/2620655-cbl-and-associates-properties-cbl-ceo-stephen-lebovitz-on-q3-2014-results-earnings-call-transcript?part=single

 

Don't think I'd heard about the CoolSprings development previously...

"Construction is also underway on the Sears redevelopment at CoolSprings Galleria. Cheesecake Factory is opening in November and American Girl, H&M, Belk Home and additional shops and restaurants are set to open in 2015."

http://seekingalpha.com/article/2620655-cbl-and-associates-properties-cbl-ceo-stephen-lebovitz-on-q3-2014-results-earnings-call-transcript?part=single

 

CBL bought this property from Sears to redevelop themselves.

 

That explains it.  Thanks.

[Marve2013]

Hi Everyone,

 

I'm new to the forum and would like to thank everyone for sharing information. 

 

I recently purchased shares of SHLD (prior to Oct.30) and am now waiting for the arrival of SHLDZ into my account ... seems like it's taking very long.  I have talked to my broker and contacted the information agent (both have said it could still be processing).  Am getting a bit worried about the approaching deadline. 

 

Would like to know when you all got your SHLDZ?  And for those going through a broker, are there specific forms the brokers have to fill out for the oversubscription option? 

 

Thank you all

 

[wisdom]

http://finance.yahoo.com/news/sears-holdings-plans-raise-funds-113518522.html

 

REIT SHLD

[Matson125]

Today is a good day.......

[wisdom]

http://biz.yahoo.com/e/141107/shld8-k.html

 

additional info.

[bmichaud]

Of course it's thru a rights offering. What a pig.

[focusinvestor]

Of course it's thru a rights offering. What a pig.

 

This is truly a great way to do this... even though we put more capital at risk, it ensures Holdings has enough liquidity to do many other things. More cash in Eddy's hands (no comments from the peanut gallery) is money good...

[HeresyValue]

Jesus. So many catalysts at once. Berkowitz must really have put on the heat. That or increasing withdrawals at ESL.

[ni-co]

Yes. He wants us to put up more cash. Yet, at the same time, this will really highlight the RE value. Wonder whether the warrant holders will be offered rights to buy the REIT.

[Luke 532]

They also mentioned their financial performance for the quarter so the typical big drop after earnings probably won't happen this time around since that information is already out there.

 

As for operations, domestic adjusted EBITDA is expected to be a loss of $275M-$325M, similar to a year ago, but a sizable improvement from Q's 1 and 2.

 

"We believe this change in trend is a positive development that we currently expect to continue into the fourth quarter."

 

Comp store sales fell just 0.1% (up 0.5% at Kmart, down 0.7% at Sears domestic).