and to think i was departing for the evening.
linda, you asked:
"How can ESL’s Debt cancellation be converted
into NEWCO - Transform Holdco - Stock when Newco
is a separate Entity from Sears Holdings?
May I ask where you read the above? Thanks."
my first thought would be that newco, which IS a separate entity from shc, will be issuing shares in its own company (i.e. newco) and some of those shares will be issued to esl (probably as newco's main principal investor/owner) in consideration for what esl contributed to newco as part of the purchase price paid to shc. that contribution (esl's secured debt from shc) is what is being contributed and the compensation for that debt will be shares of newco.
so, where did this scheme get hatched? look at page 85 of 157 of docket 2339. that diagram represents a bc section 363 exchange which was put forth as one way to preserve some/all of the nol's for newco. while that specific diagram was based on an irs private letter ruling to some other company, deloitte or weil used it as an example of what could be done in the particular case of transform holdco providing consideration to shc (in this case, partially in the form of a credit bid).
don't try downloading docket 2344 on your phone or it will blow up or lock up. it is quite long.
look on page 237 of 598 of docket 2344 and starting at line 20 which continues onto page 238 of 598 from lines 1-3 there is a specific provision in esl's revised bid (which is the bid accepted by shc as a qualified bid) which provides for the issuance of newco stock in exchange for the credit bid.
shc's consideration is $1.3 billion in debt to esl which they do not have to repay and esl's consideration is stock in newco.
IF, IF, IF esl's bid is approved by the court, it is my expectation that transform holdco will get a "real" name, a filing/prospectus will be submitted to the sec authorizing shares in the newly named company, and some of those shares will be issued to esl in consideration of the $1.3 billion debt cancellation.
it is my expectation that shldq shares will be cancelled and IF, IF, IF those shares do not become worthless, we will see in a plan of reorganization a provision for issuance of newco (whatever the renamed company is) shares to commons (in some fashion) probably to some other secured creditors, and then to unsecured creditors as well.
in order to determine what number of shares might go to the creditors, it seems that knowing the surplus from the shc liquidation is paramount, unless creditors waiting to be paid agree to take newco shares in exchange for cancelling their debt. at that point, not sure, but if there is still any surplus remaining, that might go to transform holdco (real named company)
those are my thoughts on how this might play out but the exchange of debt for shares was part of esl's revised bid as noted above.
