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Lion,
In your post # 31092 you said:
“Emerge what from bankruptcy? A shell as people are calling it? You think an assettless shell emerges? Oh restructure.... um... thats weird the docket says they are restructuring. Matter of fact they even have a website dedicated to the restructure and even a restructuring team. Guess what that means. They have a plan. Just because its not public knowledge does not mean they do not have one. If they didn't then there would be no reason for the restructuring committee. Lol
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So, let’s take a look at the most recent billing from that restructuring professional which shc hired, M—III Advisory Partners, LP (docket 2722 filed on march 1, 2019).
Their invoice stated that during the reporting period, M-III provided services central to the debtors’ restructuring process, including:
Asset Disposition: M-III prepared for and attended the liquidation auction. M-III also prepared for and attended the sale auction. M-III prepared various analyses and assisted in preparing the Asset Purchase Agreement and Transition Services Agreement in conjunction with counsel and the investment banker related to the sale.
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Wind-Down Budget: On an ongoing basis, M-III assisted the Debtors in revising and updating a Wind-Down Budget as required by the terms of the DIP loan and as an alternative to the going concern sales process.
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the restructuring committee, as advised by M-III, agreed to a going concern sale to els's transform holdco. and, as provided in M-III's retention agreement, it M-III were to be able to complete such a transaction within 6 months it would receive a $2 million transaction fee bonus. this invoice included a request for payment of that $2 mil.
notice, what got them the $2 mil "bonus" was selling a "material portion of the business" NOT any emergence of old sears from bk as a going concern. old sears hasn't emerged and it isn't a going concern.
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Note(s): (a) Per Debtors' Application for entry of an order Authorizing the Debtors to retain M-III Advisory Partners, LP to provide a Chief Restructuring Officer and certain additional personnel for Debtors Nunc Pro Tunc to the commencement date; paragraph 20(iii) [ECF No. 328] Transaction Fee: In addition to all other compensation provided for herein, M-III shall be entitled to an additional fee equal to (a) $2,000,000, if a material portion of the business of the Debtors is sold through one or more section 363 or other sales within six months following the Commencement Date or emerges from bankruptcy as a going concern
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nothing in their current invoice going through january 31 indicated any work or reorganizing what's left of old sears. in fact, what they appear to have actually worked on is a WINDDOWN BUDGET. one might think they are working on updating the winddown budget because there is going to be a winddown of old sears.
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while i believe in the analysis i have made i don't wish any shldq holders ill.
i sold out my remaining position yesterday. made a substantial profit since my basis was $0.232 and as i had previously posted had reduced my position by 75% a while back. didn't catch the $2.70+ top but did well nevertheless.
will keep an eye out for a por (which i still don't believe is coming) or for an announcement from eddie that all commons will be exchanged (which i also don't believe will happen based on my read of the various docs, laws, and irs rulings).
nobody has been able to provide any convincing argument that this can not be done based on eddie's holding alone. he satisfies the requirement of majority shareholder in the old company as well as the new company.
no place can i find where it says once the majority shareholder requirement is satisfied that everybody else gets to go along for the ride.
i'll get back in if that is proven to be otherwise, but i don't hold much hope for that.
glta with the emphasis being on the luck part.
i don't believe "all is golden".
the reason for this filing and the subsequent order was to establish that eddie is a substantial owner of stock and debt in old sears. the reason this was/is necessary is that in order for transform holdco to preserve the tax assets there has to be a majority owner in transform holdco who was also a majority owner in old sears. that majority owner is eddie.
as i have posted previously, it is my belief that eddie can satisfy this requirement alone and that he does not need to bring along the remaining common stockholders to do this.
if eddie were to declare his stock worthless (by making some claim on a tax return his holdings in old sears, i.e. shldq and debt, then he would be voiding his ability to claim majority ownership in old sears for a period of 18 months prior to the tax asset issue becoming effective.
if you see paragraph 10 of the order cut/pasted below, you will see all of this was done to preserve the tax reorganization status so that eddie could claim nols under transform holdco.
this is precisely what the bloomberg article discussed and what has been discussed on this board previously.
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10. The relief granted in this Order is intended solely to permit the Debtors to protect, preserve, and maximize the value of their Tax Attributes; accordingly, other than to the extent that this Order expressly conditions or restricts trading in interests in, or Claims against, the Debtor or making worthless stock deduction claims with respect to interests in the Debtors, nothing in this Order or in the Motion shall, or shall be deemed to, prejudice, impair, or otherwise alter or affect the rights of any holders of interests in, or Claims against, the Debtors, including in connection with the treatment of any such interests under any chapter 11 Plan or any applicable bankruptcy court order.
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remember, these were part of the first day motions entered when sch and the other debtors filed for bk. at that time they didn't know they would be selling substantially all of their assets to transform holdco. whether a new company merged with shc and its related debtors or there was a sale to some other entity (in this case, transform holdco), they needed to establish who was a majority stockholder prior to the filing. remember all of the sec filings which eddie filed on behalf of himself, esl, jpp II and rbs et al. that was to fulfill this requirement.
your comment about >50% mew equity to old commons is ENTIRELY satisfied by eddie's ownership interest.
frost,
please explain how we all benefit if eddie does.
while it MAY end up being true, the article doesn't say that. it doesn't even suggest that.
eddie can satisfy the requirement based on eddie's position alone.
i'm sure he has some philanthropic interests, but saving shldq shareholders if he doesn't have to and isn't required to is probably not high on his list.
steven,
don't get ahead of yourself.
the loophole was not explained away in this article.
that loophole concern is can the requirement be met based on eddie's stock and debt ownership alone?
since he is a majority owner of old sears and a majority owner of holdco, that to me suggests the nols can go to holdco without taking the remaining shldq stockholders.
at no place in the rules, law or this article does it say that ALL shareholder of the old corporation must be shareholders of the new corporation.
also remember there was a securities consideration component of the apa. eddie provided 3000 shares of class b securities in holdco to sch and the other debtors to be distributed in accordance with the distribution agreement.
it's not beyond the pale to think that the "superpriority" credit (owned by eddie) might get shares of this class b stock. if this were to occur, then not only would eddie have "stock" in both the old and the new company, but he would also end up as a creditor of the old company being issued stock (class b stock) of the new company.
lion,
this is a reposted link from shyguy. you should read it. warning, it's longer than tweet length but it explains exactly what i have been posting for weeks.
eddie purchased the nols from old sears.
old sears does not have the nols.
there is no need for eddie to "reverse merge" with old sears to get the nols because he already has them.
https://news.bloombergtax.com/daily-tax-report/insight-sears-net-operating-losses-will-survive-bankruptcy?utm_source=rss&utm_medium=DTNW&utm_campaign=00000169-265e-dd24-abff-367e1d2e0000
"any" does not mean "all". these lawyers aren't making $1300+/hour to make stupid mistakes whereby any would be interpreted to mean all.
Buyer shall provide to Sellers detailed instructions as to steps to take (or not take) in order to secure and preserve the qualification of any of the transactions set forth in this Agreement as a Tax Reorganization..(including) ... (ii) the merger of any of Sellers’ Subsidiaries with another Sellers’ Subsidiaries after the approval of the Bankruptcy Plan and on or before the Closing Date or conversion of any of Sellers’ Subsidiaries into limited liability companies with effect after the approval of the Bankruptcy Plan and on or before the Closing Date.
again, any does not mean all and the hoffman estates corporate campus was not a sellers' subsidiary. and since it was hoffman estates alone, it was not a merger of one subsidiary with another subsidiary as an llc.
no, actually you are making my point.
the apa, in section 9.2 states that eddie will direct old sears to take certain actions, some of which might be to convert some subsidiaries into llc's.
the example of activities taking place in delaware involved setting up the hoffman estates corporate campus as a separate llc.
the hoffman estates corporate campus IS NOT one of the subsidiaries of shc which filed for bk.
this is an action eddie is taking.
this example leaves NO VALUE with old sears. if you will note, the llc is TF Hoffman Estates as in transform holdco. not shc or shldq.
and if you actually take the time to read the docket, it does not say that all sears and affiliates would be turned into llc's.
if you are going to search the delaware site, look for seven digit file numbers beginning with "7".
everyone of those i have looked at were set up within the past month.
the "TF" certainly seems to indicate transform holdco
and this is the one he set up for the corporate office site in illinois:
7257141 Incorporation Date / Formation Date: 1/28/2019
(mm/dd/yyyy)
Entity Name: TF HOFFMAN ESTATES IL HOLDCO LLC
Entity Kind: Limited Liability Company
if you go on the corporate search site for the state of delaware, you will find a boatload of "TF" companies eddie is setting up to hold properties he purchased from "old sears" as part of the "substantially all of the assets".
not surprising the hoffman estates property (over 200 acres of undeveloped property and 2.2 million sq ft of corporate office space) would be split out as a separate entity.
looks like he has got a business plan in mind and is setting a number of the acquired assets up as individual llc's for whatever purpose he ultimately has in mind.
i've explained my position multiple times and posted it here.
you don't seem to be able to articulate your position or support it with anything.
i've got the time, just not sure you can explain it.
the restructuring committee comments you made date back to october 15.
any plan they were discussing back then have been thrown out the window.
can you come up with ANY link showing current actions the restructuring committee is taking to do any of the things you suggest are being done?
still not answering the question.
what assets do you see remaining with old sears?
it is your assertion it is not an "assetless" company. so, what assets do you see remaining?
if old sears had a plan of reorganization, then why request an extension?
a plan of reorganization is their way out so why keep it under wraps?
why did they need to sell substantially all of their assets to holdco if they had a plan to reorganize and emerge?
that same restructuring committee you reference are the ones who said they saw no viable way forward and would get more value by selling substantially all of the go forward assets, including the tax assets, to holdco.
debt changing hands at a discount is not resolving the debt. the debt still exists and needs to be paid off.
just because one party holding the debt felt it was better to get something right now instead of maybe nothing later decided to sell, doesn't mean the debt goes away.
it's really pretty simple.
whomever bought the debt at a discount is now the party standing in line to be repaid by old sears. the only way they can now make a "big deal on the debt" is to either resell it to someone else or wait to be paid a higher amount by old sears in satisfaction of the outstanding credit claim in bankruptcy.
unless dismissed, old sears will be settling its debt mess for the next 2 to 3 years. if they are dismissed they will be fighting in courts without the protection of bk court for no less a time period.
their only way to avoid a mess it to EMERGE from bankruptcy. they can only emerge if they file a plan of reorganization which is approved by the creditors and the judge.
Bankruptcy emergence occurs when a company goes into bankruptcy, but is able to reorganize its debts and assets, and create a plan to pay all or some of its creditors. The emergence stage of a bankruptcy occurs when the court and creditors agree to a reorganization plan and the judge files the bankruptcy's final decree. The main benefit of emergence over liquidation is the company can continue operating as a business. However, unlike liquidation, most debts are not cancelled, and the company must pay them to avoid another bankruptcy.
and, you still didn't answer my question which was "what assets do you see being available to "old sears" after all is said and done?
yes they do! at 50 cents. r u selling to them yet?
one would have thunk with this huge tender news this stock would have gone to the moon by now.
has the q come off?
where's the 8k announcing this?
aren't they required to file it by now?
once this tender offer gets absorbed by the whales this stock will ????
lion, are those debt acquisition companies who are supposedly purchasing this debt signing agreements they no longer expect shld to honor that debt?
just because they may be purchasing debt at a discount doesn't mean they don't expect to be paid at some premium over their discounted purchase price. you seem to be placing a risk premium at zero.
whatever obligation there was before will be there after. the question is, how much on the dollar will these creditors receive?
you should probably check your math. it's not a 78% discount to today's close.
lion,
am not continuing to hold shares because i believe there is value in what's left of old sears. as i have maintained all along, i feel if there is to be any value for the commons, it will as a result of an exchange with holdco.
i don't believe there is much of any value with old sears and i believe old sears is on a three year path to liquidation and dissolution.
no big deal.
when sears relocated to hoffman estates the village provided tax incentives to sears. in order to receive these annual tax incentives (which was an actual return of a portion of the taxes sears paid), sears needed to keep at least 4250 employees at the location.
there were descriptions as to how these employees were to be counted.
the school district of hoffman estates sued the village for the purpose of preventing the village from turning over $9+ million in tax incentives claiming sears had failed to maintain the minimum # of employees.
sears provided documentation they did and are asking judge drain to order the money turned over to sears.
this appears to be more of a hostile mini tender offer by baker mills to shldq shareholders. the offer from baker mills to current shldq shareholders it to purchase a specified number of shldq shares from shldq shareholders for 50 center per share, offer ending on march 15.
this is not an offer from eddie. this is not even an offer from shc or any of the other debtors.
this is baker mills making an offer for your shares.
not sure if they will file but see no reason they shouldn't. after all, there have been a number of filings for shld with the sec since they entered bk.
depending on how much you want to work, you could search the apa for assets purchased by holdco, research the store closings and the gobs shc is currently conducting, look at the excluded assets in the apa (section 2.2 i think) and possibly come up with some guesses that way if you don't care to wait for a filing.
seems baker mills, llc has made mini-tender offers for abbott labs, tesla, principal financial among others.
never heard of them before.
wonder wtf?
certainly seems to put a 50 cent floor on the share price for the next two weeks.
shyguy, you said:
"This dead company is entering into more contracts to expand its business."
the thing apparently being missed is the fact that shc and the other entities who filed for bankruptcy are DEBTORS IN POSSESSION.
they have a LEGAL RESPONSIBILITY to continue to run the businesses as the "owners" until the closing occurs and all of these things (such as the new craftsman line and this kenmore agreement) are handed over to transform holdco.
this is NOT unusual. you sell a house to somebody but the closing does not take place until 60 days after the sale and you are still in possession, if anything adverse happens to that house while it is still in your possession, you would be liable, not the buyer.
old sears couldn't just stop business the day judge drain signed the order approving the sale. old sears is obligated for a number of things until the actual closing occurs and even then, i would imagine there will be a number of things for which they will continue to be responsible to do. there is still some type of cooperation agreement which has yet to be filed which will spell out these things.
anybody thinking announcements such as this have anything to do with value in old sears will be sadly mistaken.
they are doing these types of things for the benefit of transform holdco, the new "owner" until the closing takes place.
boy, hope that's not the shldq template. 200 shares of old common stock got 1 share of new.
very low volume and for today there have been no trades.
this is their profile:
Elah Holdings, Inc. does not have significant operations. It intends to acquire businesses in the commercial and industrial markets. Previously, the company was engaged in aluminum melting, processing, recycling, and alloying activities in the United States and internationally. Elah Holdings, Inc. was formerly known as Real Industry, Inc. and changed its name to Elah Holdings, Inc. in May 2018. The company was founded in 1963 and is based in Dallas, Texas.
i still believe if there is going to be any real value for old common stockholders (shldq), it will be through the tax assets staying with transform holdco and that will only be if holdco makes an exchange for shldq stock.
lg,
thanks for the response. as i have said before, i am always looking at these documents and underlying bk code/irs rules to see if i can find a loophole where the commons could be left behind while eddie saves himself.
i guess i was looking at it not so much from the discrimination standpoint but purely as a box checking exercise.
box 1: was there a majority shareholder in the old company who held that position for at least 18 months? ANSWER, yes, eddie did.
box 2: is there a majority shareholder in the new company who was the same shareholder as in the old company? ANSWER, yes eddie is.
now why couldn't it be that by checking both of those boxes, eddie's new company, transform holdco gets the tax assets just based on being able to check those two boxes without having to actually exchange stock.
my nit picky self is just looking at the words. i find no place where those two requirements are set out that old stock actually has to be exchanged for new stock in order to satisfy the requirement.
that's what i mean by a "loophole". not sure if it is really a loophole or just paranoia but that is why i am uncertain about the commons being saved.
if it is just a box checking requirement, eddie is absolutely no worse off by not having his shldq stock exchanged for shares of transform holdco since he already is the 100% owner of transform holdco. any exchange of ALL of the shldq stock would only serve to reduce eddies' 100% position in transform holdco.
it's the above uncertainty that led me to reduce my holding in shldq by 75%. while i may flip some, at this point i'm waiting to either see a por filed or results from an irs private letter ruling about the nols and tax credits before adding back to my position.
and, on the point of the por, the way the asset purchase agreement reads, that, in itself, is a bankruptcy plan. "bankruptcy plan" is a defined term in the apa i believe, and since the apa was a document entered into jointly by transform holdco and shc (together with the other filing debtors) that just makes me wonder as well. could that apa be the only "bankruptcy plan" we see?
lots of questions and still waiting for more clear cut answers.
lg, you said:
"i]Honestly, I look at both sides of the equation. Also, Weil, Gotshal & Manges is the legal team that has also used tax attributes/NOLs in several other cases where commons were saved"
one question i have is how many of those other weil cases were ones in which weil directly represented stockholders? my feeling is that weil probably represented a "buyer" and in getting the best deal for the buyer the old stockholders were brought along as a necessary evil in order to preserve the nols.
in this particular case, a concern which i have raised is the one around a majority owner of the old company has to also be a majority owner of the new company. and, that ownership in the old company seems to need to have been in place for at least 18 months prior to the transaction.
why isn't it possible that lampert alone, as a 49.4% common shareholder of shc as well as a significant secured debt holder, could satisfy the old/new ownership requirement without the need to take in the other shldq shareholders?
i'm not interested in public relations types of answers. my question is, if eddie can qualify based on his ownership alone then legally and from an irs standpoint, he could do it without taking in the other shldq holders.
since eddie has retained the best lawyers money can buy, if this is a "loophole" or whatever you want to call it, including doing just what the letter of the law specifies, why wouldn't weil suggest that?
Chevy, you said:
“ESL doesn't have the option of "taking" any of the NOL's ...its not that simple.. and if it was I'm sure Transform Holdco LLC would be all to happy to have them. “
IF you go back to November 21, 2018 (from page 6/46 of docket 862) you can see the letter Lazard sent out to prospective bidders in which it was soliciting bids for the equity (stock) of shc. Following is an excerpt from that letter:
“We also note that the tax profile of the Company (SHC) represents the potential for substantial future value, and prospective bidders should take into account that an acquisition of the equity of the entire group pursuant to a Chapter 11 plan, through an acquisition of Sears Holdings Corporation, is most likely to preserve this potential value as part of the assets and value acquired”
Now, flash forward to December 2, 2018. SHC filed a 13D/A and the following excerpt is from Exhibit 99.1. It is another letter from Lazard which discussed the bid submitted by ESL (Lampert’s company) in which it described a bid from an ESL entity (what became known to us as Transform Holdco). That letter indicated ESL was making a bid to acquire substantially all of the assets (but not the stock which we know as shldq) pursuant to a sale under section 363 of the U.S. Bankruptcy Code.
That letter went on to say that ESL’s company would acquire Sears’ tax assets, the value of which we have incorporated into this Indicative Bid.
Now that transform holdco’s bid has been approved by judge drain, it seems plain that transform holdco has acquired the tax assets of SHC and these tax assets include NOLs as well as the mostly foreign tax credits.
As the apa clearly describes, transform holdco needs to get a tax opinion (and probably an irs private letter ruling) in order to have certainty it will be able to utilize the tax assets which it already has purchased from shc as confirmed by lazard.
Regarding the irs private letter ruling, there was a post on the board within the past two days which linked a Bloomberg article regarding lampert’s need to obtain the irs ruling.
chevy,
when you say: "The "surviving "New" Sears stores (about 400 in all) will be paying rent for their space to another company Eddie has a controlling interest in called Seritage Growth Properties"
that doesn't seem accurate.
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In the transaction, Sears sold 235 Sears- and Kmart-branded stores to Seritage along with Sears' 50 percent interests in joint ventures with each of Simon Property Group, Inc., General Growth Properties, Inc. and The Macerich Company, which together hold an additional 31 Sears Holdings properties.
In connection with the transaction, Seritage has entered into agreements under which it will lease the substantial majority of the acquired properties, including those owned by the joint ventures, back to Sears Holdings, with the remaining stores being leased to third parties. Under the terms of the master leases with Sears Holdings, Seritage and the joint ventures have the right to recapture space from Sears Holdings, allowing them to reconfigure and rent the recaptured space to third-party tenants over time.
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chevy,
you said: "Keep in mind NOL's are not "tax credits""
but also keep in mind that part of the tax assets which were included in holdco's $5.2 billion purchase price were $900 million of what has been characterized as "mostly foreign" tax credits.
there is specific language in the apa docs indicating holdco is structuring transactions to be able to realize these tax credits.
as you suggested, nols serve to reduce taxable income while tax credits are a 1 for 1 reduction of taxes.
trapper, you say:
"SHLDQ should be coming out of BK soon since they worked out a debt repayment deal. And we already know the judge liked their plan of reorganization"
what plan of reorganization is that? the one which hasn't been presented yet?
the plan which hasn't been presented because shc requested and obtained an extension to file their plan of reorganization which according to docket 2626 was approved by judge drain?
having a difficult time understanding how the judge liked a plan which has yet to be drafted?
do you have access to information not available to everyone else?
that stay which was "lifted" was for a single situation involving an automobile accident in texas which occurred prior to the bankruptcy. however, as a result of the bankruptcy, the woman involved in the accident for which she brought suit against "sears" was not able to pursue her claim(s).
this stay, which was mutually agreed to by sears and the woman, permits her to now pursue collecting insurance proceeds and possibly personal injury claims.
this was not a complicated read.
Below is from the assets purchase agreement, sears re: was a signatory to the asset purchase agreement and agreed to be bound by its terms, fwiw.
“Foreign Subsidiary” shall mean any Subsidiary of any Seller incorporated under any jurisdiction other than the United States of America and its territories, other than Sears RE.
Sears Re” shall mean Sears Reinsurance Company Ltd., a Bermuda Class 3 insurer.
IN WITNESS WHEREOF, Sears Reinsurance Company Ltd., a Bermuda Class 3 insurer, has caused this Agreement to be executed and delivered by its duly authorized representatives, and hereby agrees to be bound by all of the terms of this Agreement as a Seller hereunder.
Sears Reinsurance Company Ltd.
By: /s/ Robert J. Phelan
Name: Robert J. Phelan
Title: President, Its duly authorized officer
warren buffett, two rules for stock investing:
rule #1, never lose money
rule #2, see rule #1
Dragon,
You ask, will shldq shares be exchanged for shares of holdco?
That’s what I still cannot say for certain. The reasons for my uncertainty are outlined below.
For me, the first issue is whether or not transform holdco will be able to utilize the nols and tax credits, noting that most of the tax credit are foreign and amount to around $900 million.
While there are still a number of board posters who feel the nols and tax credits are still with shc and its shareholders (holders of shldq stock), that is not what the purchase agreement or judge drain’s order say. Below are sections of the purchase agreement. Since this is an either/or situation until a tax opinion and probably an IRS private letter ruling is obtained, I’m citing from section 9.2 of the asset purchase agreement assuming the nols not only stay with transform holdco but can be used by transform holdco as it operates the “new sears” under transform holdco.
Section 9.2 Tax-Related Undertakings and Characterization of the Transaction.
(1) Buyer shall provide to Sellers detailed instructions as to steps to take (or not take) in order to secure and preserve the qualification of any of the transactions set forth in this Agreement as a Tax Reorganization (except if and to the extent Buyer determines otherwise, in accordance with Section 2.12(b), in respect of a given transaction or a particular Seller) and to achieve the Tax Result, including, without limitation … (ii) the merger of any of Sellers’ Subsidiaries with another Sellers’ Subsidiaries after the approval of the Bankruptcy Plan and on or before the Closing Date or conversion of any of Sellers’ Subsidiaries into limited liability companies with effect after the approval of the Bankruptcy Plan and on or before the Closing Date, (iii) the filing of any Tax elections to treat any such Subsidiaries as disregarded entities for U.S. federal income tax purposes with effect after the approval of the Bankruptcy Plan and on or before the Closing Date or otherwise taking such action to establish that such Subsidiaries have liquidated for tax purposes after the approval of the Bankruptcy Plan and on or before the Closing Date, (iv) implementation of the Distribution Requirement in a manner that is consistent with section 507 of the Bankruptcy Code, (v) satisfaction of the ownership requirements set forth in section 382(l)(5)(A)(ii) of the Code, and (vi) any other instructions that in the reasonable opinion of tax counsel for Buyer are necessary or desirable to ensure the qualification of the Tax Reorganization and the achievement of the Tax Result … , and Sellers shall follow such instructions; provided that … Sellers agree to cooperate with Buyer in order that, for federal income Tax purposes, the transactions effected pursuant to this Agreement, together with the distributions made by, and liquidation of, Sellers pursuant to the Bankruptcy Plan, are treated as one or more plans of reorganization under section 368 of the Code and as qualifying as one or more reorganizations under section 368(a)(1)(G) of the Code …
(b) Sellers agree that (i) Buyer will suffer irreparable damage and harm in the event that any Seller does not comply with Section 9.2(a) or any instructions properly given by Buyer thereunder and that, although monetary damages may be available for such a breach, monetary damages would be an inadequate remedy therefor and (ii) Buyer shall be entitled to an injunction or injunctions against any non-compliance with, and to seek specific performance of, the agreements and covenants set forth in Section 9.2(a) and any instructions properly given by Buyer thereunder.
What this section of the apa says to me is that transform holdco is going to do everything in its power to make sure the transactions contemplated in the apa qualify for nol tax treatment favorable to transform holdco. Part of the “everything” would be to direct sears holdings corporation to merge or combine subsidiaries if the tax advisors to transform holdco determine this is what needs to be done to permit transform holdco to maximize the nols. It also includes the possibility of converting subsidiaries into limited liability corporations.
HOWEVER, THERE IS NO PLACE IN THE AGREEMENT WHICH SAYS THAT TRANSFORM HOLDCO WILL BE MERGING WITH SHC OR WITH SHLDQ. AND THERE IS NO PLACE IN THE AGREEMENT WHICH SAYS THAT TRANSFORM HOLDCO WILL BE ACQUIRING THE EQUITY INTERESTS OF SHC (WHICH MEANS ACQUIRING SHLDQ STOCK).
The only two mentions of acquiring stock are related to the sparrow properties and to a possible transaction associated with the foreign tax credits which I will address below.
First the sparrow properties:
s) all equity interests of SRC O.P. LLC owned by SRC Sparrow 2 LLC as Seller; provided, that if either (i) SRC Sparrow 2 LLC has filed a petition for relief commencing a case under chapter 11 of the Bankruptcy Code for the purpose of selling such equity interests in SRC O.P. LLC, and Buyer or its Affiliate has purchased such equity interests pursuant to a chapter 11 plan of reorganization or a sale of assets pursuant to section 363(m) of the Bankruptcy Code or (ii) Buyer shall have acquired the Sparrow Properties pursuant to foreclosure, then Buyer shall be deemed to have purchased the equity interests in SRC O.P. LLC described in this subsection (s);
Second is the discussion related to the foreign tax credits:
Section 2.13 Foreign Assets.
If, at any time prior to the date that is sixty (60) days after the Closing Date, Buyer determines (in its sole discretion) and notifies the Seller that it is necessary or desirable to acquire all of the equity interests in any Foreign Subsidiary in lieu of the acquisition of assets and assumption of liabilities contemplated by the first sentence of this Section 2.13(a), then the Sellers shall use reasonable best efforts to transfer such equity interests, which equity interests shall be deemed to be Acquired Foreign Assets.
IT’S IMPORTANT TO NOTE IN THE SECTION ABOVE THAT TRANSFORM HOLDCO RECOGNIZES THE NEED TO POSSIBLY CONVERT THE PURCHASE OF FOREIGN ASSETS FROM AN ASSET PURCHASE TO AN ACQUISITON OF ALL OF THE EQUITY INTERESTS.
ALTHOUGH MANY BOARD POSTER HAVE STATED THEIR OPINION THIS IS WHAT WILL HAPPEN TO SHLDQ STOCK, THERE IS NO PLACE I CAN FIND IN ANY OF THE AGREEMENTS WHERE THIS IS EVEN CONTEMPLATED. THERE IS NO LANGUAGE WHICH STATES THAT TRANSFORM HOLDCO MIGHT NEED TO CONVERT ITS ASSET PURCHASE OF SUBSTANTIALLY ALL OF THE ASSETS OF SHC INTO AN ACQUISITION OF ALL OF THE EQUITY INTERESTS OF SHC (I.E. PURCHASING ALL OF THE SHLDQ STOCK)
THERE IS NO STATED CORRELATION BETWEEN CONVERTING ANY SHC SUBSIDIARIES INTO LLC’S OR MERGING ANY SUBSIDIARIES WITH TRANSFORM HOLDCO SUBSEQUENTLY MERGING WITH SHC/SHLDQ.
IF ANYONE KNOWS OF ANY SUCH LANGUAGE IN THE AGREEMENTS, PLEASE POST IT.
The link below is to the first amendment to the apa. Pull it up and do a search for “in lieu” and you will get the language about converting foreign assets purchase to stock purchase.
https://www.sec.gov/Archives/edgar/data/1310067/000119312519041193/d704657dex21.htm
Additionally, if you look at section 2.1 of the apa, it describes what is included in the Purchase and Sale of the Acquired Assets. The shldq equity was not included. In fact, if you look at the next section of the asset purchase agreement under section 2.2 you will see what assets were specifically excluded.
Section 2.2 Excluded Assets. Nothing contained herein shall be deemed to sell, transfer, assign, convey or deliver, or cause to be sold, transferred, assigned, conveyed or delivered, any right, title or interest of Sellers in, to or under the Excluded Assets. “Excluded Assets” shall mean:
(l) except as otherwise expressly included as Acquired Assets, all shares of capital stock or other equity interests of any Seller or Subsidiary of the Seller or securities convertible into or exchangeable or exercisable for shares of capital stock or other equity interests of any Seller, Subsidiary of the Seller or any other Person;
https://www.sec.gov/Archives/edgar/data/923727/000119312519012110/d687440dex9986.htm
the link above is to the sec filing referencing what I have posted. And, as you can clearly see in (l) above, ALL SHARES OF CAPITAL STOCK AND OTHER EQUITY INTERESTES OF ANY SELLER OR SUBSIDIARY OF THE SELLER OR SECURITIES CONVERTIBLE INTO OR EXCHANGEABLE OR EXERCISABLE FOR SHARES OR CAPITAL STOCK OR OTHER EQUITY INTERESTS OF ANY SELLER, SUBSIDIARY OF THE SELLER OR ANY OTHER PERSON ARE SPECIFICALLY EXCLUDED.
So, with the specific exception of the equity of the sparrow properties and the possible switch from an asset purchase of the foreign assets to an acquisition of the equity of those foreign assets, there is absolutely no mention in the agreements of transform holdco exchanging shldq stock for transform holdco stock.
Furthermore, there is an interesting section of the apa which describes the Distribution Requirements:
“Distribution Requirement” shall mean the requirement that each Seller … (iii) shall dissolve no later than the end of the third taxable year ending after the Closing Date, and (iv) during the period between the Closing Date and its dissolution, shall limit its activities to those which are merely for the purpose of liquidating its assets (which may include maintaining a going operation for the preservation of value, pending distribution or sale), winding up its affairs, resolving and paying its debts, and distributing any remaining assets (which may include a distribution to a non-corporate liquidating vehicle).
Although there was a post yesterday of a “forward looking statement” it was outdated. That statement indicated shc was still trading on the Nasdaq. The most recent “forward looking statement” is pasted below from the most recent 8k.
Notice the comment:
“uncertainty associated with evaluating and completing any strategic or financial alternative as well as the Company’s ability to implement and realize any anticipated benefits associated with any alternative that may be pursued, including the asset sales and wind down of operations;”
So, not only does the apa seem to require shc/shldq to dissolve no later than the end of the third taxable year ending after the Closing Date, that concept of shc/shldq liquidating seems to be supported in the “wind down of operations” comment in the most recent “forward looking statement”.
Forward-Looking Statements
This Form 8-K may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this filing that address activities, events or developments that the Company expects, believes, targets or anticipates will or may occur in the future are forward-looking statements. The Company’s actual results may differ materially from those anticipated in these forward-looking statements as a result of certain risks and other factors, which could include the following: risks and uncertainties relating to the Chapter 11 Cases, including but not limited to, the Company’s ability to obtain Bankruptcy Court approval with respect to motions in the Chapter 11 Cases, the Company’s ability to confirm an acceptable plan of reorganization, the effects of the Chapter 11 Cases on the Company and on the interests of various constituents, Bankruptcy Court rulings in the Chapter 11 Cases and the outcome of the Chapter 11 Cases in general, the length of time the Company will operate under the Chapter 11 Cases, risks associated with third-party motions in the Chapter 11 Cases, the potential adverse effects of the Chapter 11 Cases on the Company’s liquidity or results of operations and increased legal and other professional costs necessary to execute the Company’s reorganization; the conditions to which the Company’s debtor-in-possession financing is subject and the risk that these conditions may not be satisfied for various reasons, including for reasons outside of the Company’s control; the impact of and ability to successfully implement store closures; the Company’s ability to consummate sales of assets and the terms and conditions of any such sales; uncertainty associated with evaluating and completing any strategic or financial alternative as well as the Company’s ability to implement and realize any anticipated benefits associated with any alternative that may be pursued, including the asset sales and wind down of operations; the consequences of the acceleration of our debt obligations; trading price and volatility of the Company’s common stock and the risks related to the Company’s delisting from Nasdaq and trading on the OTC Pink Market; as well as other risk factors set forth in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission. The Company therefore cautions readers against relying on these forward-looking statements. All forward-looking statements attributable to the Company or persons acting on the Company’s behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and, except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
dragon,
it is a short sentence but i think it may be misinterpreted. _________________________________________________________________
In some ways, the “new” Sears (THE GOING CONCERN WHICH TRANSFORM HOLDCO PURCHASED) has a lot in common with the company (SEARS HOLDINGS CORPORATION AND THE SHLDQ SHAREHOLDERS) that filed for bankruptcy protection in October.
Its (SEARS HOLDINGS CORPORATION AND THE SHLDQ SHAREHOLDERS) largest shareholder is now its owner (resulting form shc's sale of its going concern to transform holdco).
________________________________________________________________
in other words, what used to be owned by sears holdings corporation and its shldq stockholders is now owned by transform holdco.
eddie went from being the largest shareholder of sears holdings corporation as represented by his majority ownership of shldq stock to being the 100% owner of everything sears holdings corporation sold to transform holdco which now has nothing to do with shldq.
___________________________________________________________________
also note what eddie said about the 425 stores which were purchased. that has previously been characterized as the 425 most profitable stores but his article quotes lampert as saying:
Lampert told The Wall Street Journal last week that he intends to sell or sublease some of Sears’ remaining 425 stores. Some of those stores are not profitable, and in financial forecasts ESL said it expected to bring in about $200 million a year through real estate sales over the next three years, according to court filings.
how is it that if those were the "most profitable stores" that some of those stores are not profitable?
tsp,
what company do you think is going private?
transform holdco is already private. as an shldq shareholder i didn't get any compensation and nobody else did either.
transform holdco doesn't have to do anything to go private, they already are private.
shldq is not a company, it is a stock symbol representing a share of ownership in sears holding corporation and everything which sears holdings corporation owns.
unfortunately for shldq shareholders, sears holdings corporation no longer holds much of anything since they sold substantially all of their assets to transform holdco.
shc and all of the other debtor companies under the umbrella of shc are in bankruptcy. i see three options for them (which also means shldq shareholders): (i) they are declared administratively insolvent and converted to a chapter 7 case with a trustee appointed to liquidate them, (ii) they are dismissed from bankruptcy and then have to fight things out in court without the protection of bankruptcy, and (iii) they have some way forward and file a plan of reorganization which needs to be voted on and subsequently approved by the bankruptcy court.
now, explain why sch and the other debtors agreed with transform holdco (i believe it's in section 9.2 of the apa) that shc would liquidate withing three years of the closing date.
seems to me like there is a built in kill date for the demise of shc.
that's not spinning, those are the facts (look at the apa) and if you have any other options than the three i have stated above, put them forward.
for me, it boils down to what happens with the nols. can eddie get a tax opinion and irs private letter ruling or not?
if this double posts, i'm maxed out for the day.
orion,
simply doing a merger with shldq was an option eddie had at the very beginning. he chose not to do that so that he wouldn't have to assume all of the creditor liabilities he was able to avoid by having this transaction considered as one satisfying the standards of a 363(f) sale.
if he were to somehow now decide to merge back with shldq, then he would also be taking on all of those liabilities he successfully avoided by structuring the transaction the way he did.
i've posted many times before why i don't think a reverse merger or whatever term anyone wants to use is feasible. HOWEVER, if eddie doesn't get a favorable ruling on the nols then i suppose anything is possible.
i've also said that one of my fears when examining the "continuity of proprietary interest" provision is that only 50% of the shareholders in the old company are required to be shareholders in the new company.
can this provision be met by only considering eddie's stock ownership.
eddie wouldn't have to even buy his own shares, much less those of us who currently own shldq, if the provision only states that 50% of the shareholders of the "selling" company, i.e. shc) have to also be shareholders of the "purchasing" company i.e. transform holdco.
believe me, if that is a exploitable loophole, don't you think eddie will use it to screw us?
that's one reason why i posted last week that i had sold off 3/4 of my position.
if/when shc files a por, we should know with certainty the status of the shldq shares. until that time, it's guesswork.
tsp,
he did NOT purchase the entire company. he purchased substantially all of the assets.
read the asset purchase agreement and read what a 363 sale is.
a 363 sale can be structured as Either a sale of the stock in a company OR a sale of substantially all of the assets of a company.
buying substantially all of the assets of a company IS NOT buying the stock of the company.
the apa specifically stated this was an asset sale. the words used in both the apa as well as in judge drain's 83 page order approving the asset sale took great pains to carefully describe what the sale was and therefore was not.
his order was constructed to give transform holdco the best opportunity to obtain a favorable tax ruling so that transform holdco could utilize the tax assets which were part of transform holdco's purchase price.
drain took great pains to document this purchase as satisfying the standards of a 363(f) transaction.
i'm skirting no facts here. transform holdco's purchase was an asset purchase NOT a stock purchase.
north, what do you mean by "another ipo".
as far as i can tell, he has not gone through the first one.
transform holdco was registered in delaware as a private company whose only shareholder is eddie.
eddie didn't need an ipo to make himself the sole owner of transform holdco.
feel free to correct me if i am wrong here, but i have not seen a prospectus for any initial public offering in transform holdco which is why i don't understand what you mean by "another ipo"
seriously, where was his first one as it relates to the current apa which was not only accepted by shc but approved by judge drain?
and what does that have to do with anything?
transform holdco is a private company
transform holdco is 100% owned by esl
esl is 100% owned by edward scott lampert
the only stockholder is eddie lampert
there are no other shareholders
what is there to trade? eddie would only be playing with himself!
eddie's comment in the wsj article about private vs public was being private must be balanced against the opportunity to raise capital as a public company.
if/when eddie were to decide to become a public company, then there would be shareholders who, presumably, would be trading their stock on some listed exchange.
as it now stands, there are no shareholder other than eddie in transform holdco and transform holdco is not trading on any exchange.
your example, while interesting, has absolutely nothing to do with this situation as it now stands.
i understand that esl is not emerging from bk. esl was never in bk. transform holdco is not in bk. once the actual closing of the sale takes place, transform holdco can go about the business of running the "go-forward" stores it purchased from sears while shc is still in bk.
there is no evidence that shldq is emerging from bk. however, so long as you equate shldq with sears holdings, then if/when things get resolved in bk court, shldq would be the entity which would emerge.
if shldq has its bk case dismissed, that is not the same as emerging from bk. that would be equated with jumping out of the frying pan into the fire.
shc, shldq, and the rest of the debtors who are currently in bk, HAVE NOTHING TO DO WITH ESL.
neither, esl, eddie, or transform holdco will be the ones working to get shldq out of bk.