Sears Holdings Corp. (fka SHLDQ)

[cottonisking]

Hello, Linda1, "A review of the contract for the Second Lien Term
Loan would likely make the numbers more clearer."

Answer:

JPP, LLC and JPP II, LLC did the right thing to avoid an ownership change. This is good for SHLDQ commons to preserve the NOLS.

They executed foot-note 2 below:

"(2) Holdings elected to pay interest on the Second Lien Term Loan in-kind by increasing the principal amount of the Second Lien Term Loan held by such reporting person."

They have 60 days to acquire the stock! So, what will happen in 60 days?

Five $5 per share within 60 days?

"converted into shares of Holdings Common Stock at the option of an eligible holder at a conversion rate of 200 shares of Holdings Common Stock per $1,000 in principal amount of indebtedness outstanding under the Second Lien Term Loan (subject to adjustment)."


***

Follow up from my previous post. Linda, "Make what happen?" The buyer or seller will put the buyers acquired assets into the hands of a taxable corporation. Please, study my previous post.


*** 26 U.S. Code § 382 - Limitation on net operating loss carryforwards and certain built-in losses following ownership change

"(A) the percentage of the stock of the loss corporation owned by 1 or more 5-percent shareholders has increased by more than 50 percentage points, over..."

***

"ANNEX B
RECENT TRANSACTIONS BY THE REPORTING PERSONS IN THE SECURITIES OF
SEARS HOLDINGS CORPORATION

Entity Date of
Transaction
Description
of Transaction
Shares
Acquired Price
Per Share
JPP, LLC
01/05/2019 Acquisition from Holdings of Second Lien Term Loans 559,095 (1) (2)
JPP II, LLC
01/05/2019 Acquisition from Holdings of Second Lien Term Loans 255,382 (1) (2)

(1)
Represents the number of shares of Holdings Common Stock that may be acquired within 60 days upon the conversion of the Second Lien Term Loan into shares of Holdings Common Stock. Holdings’ obligations with respect to the Second Lien Term Loan may be converted into shares of Holdings Common Stock at the option of an eligible holder at a conversion rate of 200 shares of Holdings Common Stock per $1,000 in principal amount of indebtedness outstanding under the Second Lien Term Loan (subject to adjustment).
(2)
Holdings elected to pay interest on the Second Lien Term Loan in-kind by increasing the principal amount of the Second Lien Term Loan held by such reporting person."

https://www.streetinsider.com/SEC+Filings/Form+SC+13DA+SEARS+HOLDINGS+CORP+Filed+by%3A+ESL+PARTNERS%2C+L.P./15020315.html

*** 26 U.S. Code § 382 - Limitation on net operating loss carryforwards and certain built-in losses following ownership change

"(g) Ownership changeFor purposes of this section—
(1) In generalThere is an ownership change if, immediately after any owner shift involving a 5-percent shareholder or any equity structure shift—
(A) the percentage of the stock of the loss corporation owned by 1 or more 5-percent shareholders has increased by more than 50 percentage points, over
(B) the lowest percentage of stock of the loss corporation (or any predecessor corporation) owned by such shareholders at any time during the testing period.
(2) Owner shift involving 5-percent shareholderThere is an owner shift involving a 5-percent shareholder if—
(A) there is any change in the respective ownership of stock of a corporation, and
(B) such change affects the percentage of stock of such corporation owned by any person who is a 5-percent shareholder before or after such change.
(3) Equity structure shift defined
(A) In generalThe term “equity structure shift” means any reorganization (within the meaning of section 368). Such term shall not include—
(i) any reorganization described in subparagraph (D) or (G) of section 368(a)(1) unless the requirements of section 354(b)(1) are met, and
(ii) any reorganization described in subparagraph (F) of section 368(a)(1).
(B) Taxable reorganization-type transactions, etc.
To the extent provided in regulations, the term “equity structure shift” includes taxable reorganization-type transactions, public offerings, and similar transactions.

(4) Special rules for application of subsection
(A) Treatment of less than 5-percent shareholders
Except as provided in subparagraphs (B)(i) and (C), in determining whether an ownership change has occurred, all stock owned by shareholders of a corporation who are not 5-percent shareholders of such corporation shall be treated as stock owned by 1 5-percent shareholder of such corporation.

(B) Coordination with equity structure shiftsFor purposes of determining whether an equity structure shift (or subsequent transaction) is an ownership change—
(i) Less than 5-percent shareholders
Subparagraph (A) shall be applied separately with respect to each group of shareholders (immediately before such equity structure shift) of each corporation which was a party to the reorganization involved in such equity structure shift.

(ii) Acquisitions of stock
Unless a different proportion is established, acquisitions of stock after such equity structure shift shall be treated as being made proportionately from all shareholders immediately before such acquisition.

(C) Coordination with other owner shifts
Except as provided in regulations, rules similar to the rules of subparagraph (B) shall apply in determining whether there has been an owner shift involving a 5-percent shareholder and whether such shift (or subsequent transaction) results in an ownership change.

(D) Treatment of worthless stockIf any stock held by a 50-percent shareholder is treated by such shareholder as becoming worthless during any taxable year of such shareholder and such stock is held by such shareholder as of the close of such taxable year, for purposes of determining whether an ownership change occurs after the close of such taxable year, such shareholder—
(i) shall be treated as having acquired such stock on the 1st day of his 1st succeeding taxable year, and
(ii) shall not be treated as having owned such stock during any prior period.
For purposes of the preceding sentence, the term “50-percent shareholder” means any person owning 50 percent or more of the stock of the corporation at any time during the 3-year period ending on the last day of the taxable year with respect to which the stock was so treated."

https://www.law.cornell.edu/uscode/text/26/382