The text is up on Edgar. Some observations:
1) Limits KKD's borrowings to $59 million. Question for di_vur: does this allow them anything above current borrowings. It does allow for $2.5 million in new guarantees to subsidiaries.
2) Short leash: KKD must give the banks cash flow forecasts, with comparison to prior years, for the next 13 weeks. Must be updated weekly. KKD must pay for the bank's consultant to analyze this. The banks wouldn't want this unless they were seriously contemplating pulling the plug.
3) Banks rely on Kroll. Kroll's engagement agreement -- which is not yet signed (another sign that the hiring was a desperation move by the KKD board) -- must be given to the banks within 2 days of signing. Banks must be notified within 1 day if Kroll is fired. Kroll's business plan must be given to banks within 2 days.
4) How do you like this sentence, which was not present in the earlier 10-day extension agreement? "Moreover, this temporary waiver shall not be deemed to have waived any right or remedy available against any Person other than the Borrower by reason of the matters described or referred to in the 8-K Disclosure." Sounds to me like the banks are explicitly reserving their right to sue McAleer et al. to get paid back out of cash that KKD paid in franchise buybacks.
They decentralize their operations and become a direct threat to the likes of Dunkin and Starbux by following THEIR business models. If they created a better coffee and experience than both sbux and D&D and a smaller store, ditching the hot now gimmick than maybe they would have a fighting shot @ capturing a piece of the pie. This only works if there is a glimmer of value left in the brand. Just imagine that they follow the D&D model in place where D&D is not yet esablished? This COULD in theory be a great franchise in the future, however it would look nothing like the current company. We would be talking about a business that does not sell their products away (keeping the awe intact) and filling a daily need of the avg. commuter, soccer mom and local cop! Seriously this thing "could" be huge. They do not need to reinvent the wheel they only need to copy it a bit to make this work. Now if they can somehow clean up this mess and avoid Chap11 or even Chap 7!!!
Congratulations, though your case is lame it isn't as pathetic as the others I've seen here.
A few specifics on why your bull case is bullcrap:
The level of debt relative to their cash flow generation capability going forward is what matters, not the size of the debt relative to other companies that were larger. Also, the $90 billion in debt you reference leaves out the $50 billion plus in loan guarantees they've made on behalf of franchisees.
Past cash flow isn't representative of future cash flow for several reasons:
- Fewer upfront cash windfalls from the sale of equipment to new franchisee outlets
- Much less cash flow from stock option exercises with the stock price in the toilet; stock options provided over $60 million in cash in FY '04
- Same store sales decliing 25%; that means lower cash generation from corporate stores, lower royalties from franchisee stores, lower cash from sale of doughnut mix
KKD, having squandered most of the cash it generated in the rapid expansion years on buyouts of franchisees owned by insiders and having seen its borrowing cut off by its bankers, isn't in a position to survive multiple years of losses. You referenced Enron earlier as a comparison point; maybe you didn't notice that Enron was reporting large profits right up to the quarter in which it declared bankruptcy.
The specialty of new management is negotiating with creditors and attorneys, not creating improved marketing and store operations. Making KKD a coffee destination requires a lot of things that take time: a decent coffee product line, equipment to produce it, training of store employees, revamping store operations so somebody who wants a latte isn't standing in line behind people buying a dozen assorted doughnuts each, money to advertise the improved coffee (otherwise, how does anybody know about it?). This type of transformation takes years, and where is the evidence that Cooper, who specializes in bankruptcy type situations, has any of this in his background?
You miss the point.
You make a case for KKD avoiding bankruptcy. (I disagree, although if you look at some of my previous posts you will see I disagree with less conviction than some other serious posters here.)
You fail to make any case whatsoever for one share of KKD being worth a penny more than $8.76.
i'll give you the bull case for kkd
Number 1: their debt is not so high to warrant bankruptcy, debt of approx 90 million dollars. when compared to Enron(billions in debt)or boston chicken(over 700 million in debt) 90 million is nothing. their debt load is not a strong case for bankruptcy.
number 2: their expansion has been rapid but not as rapid as other companies who went bankrupt. Compare kkd's 375 restaurants to Boston Chicken's 1000+ restaurants. Cooper was put in at the right time to stop over saturation and rapid expansion.
Number 3: other companies who have gone bankrupt have had years of consistent losses, we don't even know if krispy kreme is going to have one full year of losses.
number 4: managemnt has been changed, old management which was crooked had been replaced by experts who are specialists in turnaround. Unless the balance sheets are a complete disaster it will be easilly corrected. It wasn't so long ago that krispy Kreme was a favorite of everyone, the last year has been tough because of low carbs and over saturation.That's when livengood started messing with the financials we are looking at one year of screwy financials that need to be cleaned.
number 5: the donuts are good, krispy Kreme is synonomous with donuts that's good brand value
number 6: so much potential in terms of coffee, sandwiches etc. easilly can be competition for Tim Horton's or Dunkin Donuts if Krispy kreme applies a similar way of operating their business they will surely prevail.
krispy kreme has a great product, management had an opportunity to turn Krispy Kreme into one of the leaders in the industry but did not know how to do it, they were stopped before thing got out of control and replaced. Krispy kreme will soar
I agree with most of what you say, but must disagree with your last sentence:
"If you do most of your due diligence on a message board, you get what you deserve."
I did most of my due diligence on KKD on this message board. I checked what di_vur_se_fi and others were saying against the SEC filings and other documents referenced, and found di_vur and several other posters to be consistently credible. At this point, I certainly accept the validity of numbers that di_vur cites from SEC filings without checking them against the original, even when I (very occasionally) question his conclusions.
This board, thus verified, has been a much more deeply penetrating and more reliable source of information about this stock than any of the analysts and most of the market publications. (Wall Street Journal has published some very good information not previously available. But it largely made solid and specific suspicions previously voiced here.)
We often learn much more from those with whom we disagree than from those who share our preconceptions.
Learn from your bretheren...He appears to have more logic than you have shown.
Do you feel the need to attack others integrity and intellect, because you don't have the conviction in your own financial acumen?
There are no true KKD bulls posting here, only opportunist swing traders looking for one more quick pop so they can get out with a decent profit in arelatively short amount of time. You throw the challenge at them, they actually do a little due diligence on the stock and then respond with"I'm a contrarian" or "nobody knows anything including the shorts". They accuse us of being nasty and scaring the longs when we point out this co. has problems, but the real dirt bags are trying to convince all the lurkers to buy because it isn't that bad. All this so they can leave with a quick profit. If you do most of your due diligence on a message board, you get what you deserve.