What announcement is he referring to?

Fundamentals look good, sales look good. Toxic debt looks bad on the surface and is probably scaring most legitimate traders away but the company looks like they've been managing it well. Minimal dilution. If the tent collapses the whole thing comes down of course but their sales are looking phenomenal right now. Financials are all trending positive.

This may or may not go after next Tuesday, but long-term surface eval seems to have a lot of promise.

A lot of catalysts lined up for this company.

Good morning VHUB. I've added a small position here, and may add more down the road. I'm impressed with the revenue and the way they are managing debt. Looking forward to post-election, and seeing their Q.

What's up joma

I have not. Q should drop this month though. Should give us some insight whether they're still looking or in discussions.

Someone wake me up when the POR comes out...

Heh. Well let's hope "different" doesn't mean "oops we got so busy with the POR we forgot to leak that we're planning to cancel common."

The last amendment to the 4 May petition just says:

It's certainly a bit of psychoanalysis but this has also been one of my leading, personal reasons for thinking they will keep common intact.

If they were going to cancel, I imagine they'd let the news leak like a siv, to protect as many investors as possible. Why build up mystery and suspense for a massive let-down?

Of course, odder things are happening this year...

Man time. Good luck today. I personally expect this after hours.

Heh, well that's a great idea. I wonder if they could team up with Niantic and Nintendo and offer a back-to-school line-up in time. Someone suggest it to the IR.

Well it's interesting. The Q is about as ugly as it can get but there are points of interest, most notably under liabilities where current debt has come down considerably. If not for Sycamore pulling the trigger (moving all long-term debt to short-term debt) their current debt might actually look okay.

Their cash flow situation is pretty abominable; which is almost certainly a direct result of the Sycamore dispute (i.e., MGF Sourcing halting merchandise flow which impacted sales). Keep in mind this was a dispute that last 3 months (March to May) and is the primary reason we're here right now.

Difficult to say what ARO's position would be if not for the MGF dispute; I'd speculate that it would probably be better but by how much no one will know.

As for the -$92M net equity our resident negative nancy keeps referring to; IMO it's an irrelevant number. As a measure of credit due, it will certainly have an impact meaning if Crystal elects to push ARO into a sale, we the common will not receive anything -but we already knew that. There's not enough asset value to cover everyone down to the common shareholder. But we also know that a companys current economic value is generally a measure of future earnings; I expect Crystal will look at Management, will look at Geigers POR, will attempt to look into their crystal ball and anticipate future earnings and if they don't like what they see, then we will proceed to a sale. If they like the plan, and have high confidence in Geigers ability to return the company to profitability, they'll accept the POR.

As far as whether common will be saved or not -we need to consider the totality of asserted claims, which earlier this week totaled $162M. Businesses have 90 days to assert their claims from the time of the first creditors meeting and we're about 2/3rds into that period. Total scheduled claims comes out to about $228M if I remember correctly. This is why net equity is meaningless.

If Crystal elects to go with the POR, they'll look at claims equal to liquid cash on hand, Financing and equity vehicles. I'm sure Crystal probably wants to wipe common. Wiping common is efficient, and will add value, simply put. But like I said we have the O/S working in our favor -it's very low, at only 80M, of which only 50M floats -the schedule works in our favor (thank you Sycamore -that's how you lead a bully), and executives who've put considerable sums of money into their equity and as far as I can tell, never sold. Never underestimate a persons inner greed. Execs may say it's irrelevant but this world evolves around free cash flow and it will play a consideration.

This is a good gamble IMO.

That was also stated in the 10-K earlier this year.

You're basically handing out worst-case scenarios and what-ifs. Work with the numbers and I'll take you seriously.

Oh and one more thing. Let's not forget the potential for a claim against Sycamore for putting them in this mess in the first place.

Absolutely. But the DIP can turn into the Exit Facility under new, 10-year terms.

I don't discount that all of this can fall the other way. But the only case you can make is that Crystal will push for a clean start. That's it. Crystal is the one dictating terms -if they decide a sale better serves their interests, they will push ARO towards that, and there's little ARO can do about it.

Otherwise, there is no argument you can make. The $100M is technically part of the totality of claims that require settlement prior to exiting Chapter 11, but again, if Crystal elects to support the POR (regardless of whether common are saved or not), then they will almost certainly convert the current $100M into an Exit Facility consisting of substantially, equity (seeing as $75M of that was already spent on the BoA Revolving Facility). Like I said prior, I assume the remaining portion will sit idle in an account to prevent a default on the terms of the DIP. That will likely convert into the liquid portion of the Exit Facility (again, whether or not common are saved).

Which leaves the other, current $162M in asserted claims to date. As of ARO's last filing (10K), they had approx., $130M in liquid assets (not including the remaining $130M on the revolving BoA facility). There is still $60M on the DIP to withdraw. ARO will receive relief in the form of debt forgiveness in some form or manner throughout this process. And they are in the midst of their peak seasonal revenue.

Right now if Crystal accepts the POR, I see them getting approx., $100M in equity disbursements, renegotiating the remaining $60M into part of an Exit Facility that contains some form of revolving credit extension. ARO comes out leaner and meaner, fully reorganized, and running out of the gate. The only thing that can strengthen their profile would be to wipe common. And that's where the Equity Committee will need to speak up.

That's if the Back-to-School season is good. If not they likely force a sale.

That's been your standard response since I began posting on this board but I haven't really seen you post numbers to back the argument. Last I checked (as of 2 days ago), asserted claims totaled approx., $162M. The DIP loan is $160M, of which, to date only $100M has been withdrawn.

Please explain to us how equity is too far out of line.

That's just wrong. DIP Facilities often and easily convert into Exit Facilities, and the DIP creditor will normally become the new senior secured lender. I don't dispute that Crystal may take over ARO, which is a possibility, but your scenario is only one of many avenues out of Chapter 11.

I don't believe the Executive team intends to sell; but Crystal Financing seems to have the last word on whether this will happen or not. They're not allowed to discontinue the sell plan unless Crystal says so. That's leverage which can be used against ARO in the construction of the POR. I have no idea which side of fence Crystal sits on, saving common or getting rid of us -but they did ride in to the rescue against Sycamore's wishes. We can hope that the enemy of our enemy is our friend.

Recapitalization usually flows from the DIP Facility, into the Exit Facility under new terms.

Docket #423: 5. The Committee [of Unsecured Creditors] may establish and maintain a website as described in the Motion. Nothing in this Order shall expand, restrict, affirm, or deny the right or obligation, if any, of the Committee to provide access or not to provide access, to any information of the Debtors to any party except as explicitly provided herein. This Court shall retain jurisdiction to hear and determine all matters arising from or related to the implementation of this Order.

I think I agree.. It's taking too long. If someone found something out and wanted out, they'd just dump. Seems strategic sells, and we're missing a few of the negative nancys right now.

This week will test your manhood. All I can say is, gird your loins, and good luck to all as we approach Friday.

Yes, agreed. And quite different from the $33M estimated interest from the Sycamore tranches which, based on the current claims list, doesn't appear to be asserted or approved by the judge.

You make my case for me.

I don't believe you've stated what your math is based on, other than dire, suppositional fairytale. As far as I'm able to discern, interest isn't paid unless asset collateral is oversecured by the creditor. By your very argument, interest payments would not be allowed.

The scheduled and asserted claims are clearly stated on PrimeClerk. With the exception of the DIP loan, which must be resolved in full (or turned into an exit facility), I'm not aware of any other debt that requires resolution.

Well based on the information so far at Primeclerk, as best I can calculate (I copied all claims information into an excel sheet and totaled the assertions), of the $218M in scheduled claims only $162M have been asserted (meaning they will be paid out prior to close of BK unless objected to by the debtor).

It doesn't look like Sycamore is claiming the approx., $33M in interest on their tranche loans. I'm not sure if that's a function of BK Code (is interest written off?) or whether it'll be claimed later. ARO doesn't appear to list the interest anywhere as a claim, at least, and no assertions have been made.

Prior to totaling everything up, I ballparked roughly $300M in claims based on their 10K and filings, to include interest and DIP financing. It appears my errors offset and I end up roughly, still at $300M give or take a bit.

I don't know... Any way I look at this, unless ARO has a catastrophic back-to-school season, they should be able to meet all claims, plus refi the DIP and still come out ahead.

POR Dates

That's not correct, don't buy the spin. ARO is still dual-tracking both scenarios and nothing in the 8K changes it. The 8K updates due dates.

Incredibly tight lid on things. No info seems to be getting out, outside of the affidavits.

A wide spread generally indicates lack of trading interest; keep it in perspective. It's short-term; this will be traded heavily one way or another by end of next week.

Gotcha.

I think I already answered this; you just didn't read my response.

I think you're implying that write-offs due to closure costs, and termination of leases are considered as claims against the estate.

I don't believe that's true. I'm not an accountant; but I believe those are one-time charge-offs. ARO states in their 10K that they are incurring impairment charges. My accountings good enough to know theyre talking about negative Goodwill:

They've already expensed this and broken down the numbers in their 10K going forward.

That's correct; it all comes back in the form of claims. In any event, ARO has already stated they are maintaining supply channels and paying vendors so we shouldn't see much for claims. Inventory should play a minor role only, to their petition.

Well, doubtless they will seek to remedy the Sycamore debt. As a matter of fact, BK Code guarantees the Sycamore debt will be resolved one way or another. I think (suspect) that ARO will file a claim against them which will mediate any ultimate settlement between the two parties. I think (suspect) Sycamore will receive a combination of cash and stock at a much reduced agreement approved by the Judge. The cash will likely come from the remaining 60M yet untapped second payment from the DIP loan, and then an equity piece valued at whatever their perceived fair market value is of their stock (this version or a new version, or perhaps a preferred stake) outside of BK.

Then I think the DIP turns into the Exit Facility, (likely with a revolving credit line to replace the BoA facility), with a partial compensation arrangement of stock and 10-year repayment terms.

I see at least $60M in shares being issued among the two major parties. The actual number of shares that translates to will depend on what they value the company at, post BK. I'd say a minimum of $2 per share is about guaranteed, likely a bit higher. That's a minimum of 30M shares issued, perhaps in common, perhaps in preferred (which again, is untapped and likely our best chance of survival). Possibly in new common.

I see ARO coming out with near, or under $100M debt based only on the Exit Facility. It's possible (without stretching very far) to do this without touching common, and issuing only preferred. Whether they choose to do so is another story.

By the way it's interesting they felt obligated to provide you their timelines, not just of the POR but of the confirmation hearing. They have to conclude the reorganization by 26 August which is only 40 days after the release of the POR. I've heard of Fast Track BK's but this timeline is just on the short-side of mind-boggling.

Companys are normally upfront about common after they enter Chapter 11. If they're going to cancel their stock, they generally don't want to lead investors down a false road of hope. If they still aren't saying anything by now, then I interpret this to mean they still haven't made a decision yet.

It's further indication IMO, they intend to keep the current business structure largely intact. Since the other gentlemen brought up KMART, I'll use that as an example. When they exited, they did so under a completely new Holding company, with new common shares and a new, high speed executive team leading the charge (under a $2B exit facility).

In ARO's case, maintaining the current echelon, providing bonuses to current upper management and execs if they hit their sales targets, and the fact that their timeline is so condensed (thank you Sycamore) indicates IMO, it's likely they intend to maintain the status quo. Let's not forget the CEO who drove Aeropostale to such high successes in the early 2000's only recently returned a little over a year and some months ago. Since his return he's enforced a major restructure of the company which looked to be turning a corner when Sycamore pulled the plug.

They were also warned repeatedly that common would be worthless after the transition. Not so, ARO. The POR may say otherwise, until then I think this is a good lotto play.