I did some quick math and projections based on what we know. Here's what I've come up with:
I'm projecting revenues at 17B for the year based on same stores sales down around 12% and 150 store closures (realistically it's probably closer to 200 stores closed). That gives us an approximate gross profit of 3.4B and operating loss of around 3.5B. Average that out for four quarters and that's about .89B. Add in the debt and Sears is losing about 2B a quarter this year.
Total assets are 9B which means in a best case scenario Sears could last 5 quarters which would put BK somewhere between April and July 2018. Here's the problem though:
1) The largest asset is inventory and most of that is being sold at 40-90% off right now. The inventory isn't worth anywhere near what it's on the books for. 2) The inventory isn't being replaced and when you don't have anything to sell you can't make money. 3) Most of the assets are long term assets and not liquid. Those will have to be sold at a loss. 4) Most of the brands that are worth anything have been sold. Kenmore isn't going to bring what Craftsman did. 5) Eddie is raping Sears on the real estate which means that 2.2B in PP&E is worthless.
Factor all that in and it looks like Sears will be in serious trouble by the end of the current quarter. Current assets will be depleted and the stores will be empty of merchandise. The only way to stay afloat will be to sell long term assets but that won't last long.
I'm predicting bankruptcy will be announced by the end of the summer.
This doesn't really buy them any time. They are burning to much to last very long. They couldn't pay this debt anyway has they would file for bankruptcy and money would be clawed back. So this actually doesn't change anything.
I think this is just Eddie trying to build a case that he was really trying to keep SHLD going, to help with fraudulent conveyance lawsuits.
All this stuff is stupidity. SHLD has no money to buy inventory, so its not a viable concept. Its just an asset burning machinge that Eddie is trying to pillage to save some of his investment.
The debt refinance is not a big deal. I actually expected them to refinance some of it. But, look at the balance sheet and you see nearly 5 billion in debt is due this year. 500M is only 1/10 of that. It doesn't change anything I said above. They're still losing billions of dollars every year and they still have inventory issues with the stuff on the shelves marked 90% off and vendors pulling out.
The pension move looks like Eddie knows the end is near and is trying to remove legal liability. Announcing the debt refinance at the same time is probably an attempt to make it seem like he's still fighting so he can keep the stock price up.
I totally nailed the release date!!! Which means exactly nothing, except I have been following this pig around for way too long since I can predict its behavior...
Sears reaches a debt deal? The July loan had been extended to next year. I believe that is Eddie's 500 mil loan. I guess that is technically a default then. They can't find anyone to lend them money and Eddie is not willing to lend any more money and certainly not for any meaningful length of time.
It will finish down for the day as shorts regain control.
NAILED IT!!! RED, RED, RED<<<<<<<<<
I love how the media spun this story. When you can't frigging pay your bills that is considered a default! A partial payment is not a full payment period! LOL
That $100 million that much less they have to pay vendors now.
Sears is like a person who jumped into a pool with concrete debt ties to their ankles and they are trying to stay afloat with 99 cent arm floaties.
And there you have it......sub 8. We close Red today. Congrats to all who jumped in on the head fake rally.
Playing kick the can with debt cost's money. Now they owe more and still can not make money selling goods .
I've been a long term short on this pig, but have changed my strategy. Have made good/great money on puts, but the premiums are just insane. I agree with Tilden in that another short squeeze is possible/likely. BK is totally up to Eddie, and he ain't playing. He has either funded cash flow himself, or sold off assets and has been intractable in watching this pig shrink so this could absolutely drag on well into 2018. And while his assets are shrinking, there's still quite a lot left. So I've switched to doing spreads, buying out of the money calls AND puts, 6-8 weeks out. Those are cheap, and I'm playing equally the chances of a squeeze or a BK. Good luck to all.
Sears Holdings Corp (SHLD) Still a Bankruptcy Threat Despite Debt Deal
I venture to sbet Eddie got his share of the500M loan paid off. It was rdiscussed elsewhere that if eddie refinanced his loan and the Co wentBKk within 6 months of the deal Eddies money would be subject to clawback by SHLD stockholders and creditors from Eddie. Eddie get out of the loan now allows BK after July 7 with Eddie covered on his insider dealmaking from clawbacks. Good going Eddie
I'm reminded of an old Johnny Cash song....I fell into a burning ring of fire, I went down, down, down.....
So is Eddie paying CNBC to post positive articles about sears all day?
In April, BMO found that a basket of appliances at Sears was 7.8% higher in price than an identical basket at its home improvement peers, compared to in January, when it was only 2.5% more expensive. they also found that Sears is stocking only 1600 different models (of ALL appliances) versus over 2000 as recently as January. Circling the wagons, circling the drain.
Another.50 run-up? Who'll get stuck holding once again. I predict earnings will be dismal and down we go again. If you think Management cares about the shareholders, think back to when they acquired K-Mart, they wiped out the debt and eliminated all the shareholders.