DRAIN SIGNS THE ORDER!
maxed out on posts yesterday. can't believe EVERYONE missed this. while an sec filing might take a few days, the docket is closer to real time.
DOCKET 2507 was filed on friday, as promised, and entered at 15:14:32
in other words, around 3:45 pm just before the market close.
the filing is more than 1200 pages and the first 80+ pages are the order and following that are 1120 pages of everything related to the order.
linda has done some analysis which was posted late last night and there have been some other cautionary posts by others. i believe linda's comment that nol's will be the path to saving commons is spot on and will comment on that later.
my initial comments are from the "debbie downer" point of view.
to all those who ask "why would lampert wipe out his own shares?", here's my reason why.
the asset purchase agreement (the "apa") was entered into by and among transform holdco, llc, sears holding corporation, and its subsidiaries party hereto.
as has been pointed out many times on this board, the sale of various sears family of assets to transform holdco was a 363 SALE, IT WAS NOT A MERGER.
so, what does that mean?
it means transform holdco purchased EVERYTHING sears sold it as set forth in the apa.
so, who now owns 100% if those assets?
TRANSFORM HOLDCO!
according to schedule 7.1 (page 1120/1120) the entity interests in buyer are as follows:
1. transform holdco, llc is a delaware limited liability company
2. the sole owner of transform holdco, llc is esl investments, inc
3. the sole owner of esl investments, inc is edward s. lampert
listen closely, as of this moment, eddie owns everything which sears sold to transform holdco.
eddie owns "almost" 100% of transform holdco. why do i say "almost 100%"?
that's because transform holdco is issuing $300,000 of transform holdco class b stock (the securities consideration) to various sears' entities.
my take on class b stock is they typically have fewer voting rights than class A shares. in other words, eddie has and will continue to maintain control over transform holdco.
DRUM ROLL PLEASE
even if ALL of shldq's common stock is wiped out, including ALL of the common stock held by eddie, esl, and various other insiders, (including all of the shares still held by bruce berkowitz who is no longer an insider) eddie will still control "almost" 100% of transform holdco!!!
so, does that mean commons are de facto screwed? not sure.
however, the path to salvation for commons, if any, will be through the nol's as linda pointed out in her most recent posts.
IF, IF, IF the sale to holdco can not be successfully structured as a "tax reorganization" then, imo, eddie will have absolutely no reason to make any accommodation regarding the shldq shares via any type of exchange. why would he? if he doesn't get the nol's, why dilute his ownership by exchanging holdco shares for shldq shares, just to be a nice guy?
i listened to the berkowitz video posted earlier and have the following thoughts.
berkowitz comment was to: (i) buy when assets were distressed. that certainly fits the bill with shl. he also said (ii) from failed retailing comes great real estate empires. certainly no question that sears is a failing/failed retailer. he also said to (iii) follow the cash. in this situation, following the cash shows who purchased the sears' assets. it was eddie. however, part of that "cash" could very well be the nol's (and possibly the mostly foreign tax credits) some and possibly a great deal of which would flow to transform holdco. berkowitz most sanguine comment about his purchase of sears' stock was that he was guilty of "excessive premature accumulation".
without the nol's i believe any participation in transform holdco by the shldq shareholders is probably not going to happen. if the nols substantilly stay with the sears' entities then linda has described a way that might ultimately benefit shldq shareholders which has ABSOLUTELY NOTHING TO DO WITH TRANSFORM HOLDCO.
i don't want to max out on posts today so will not be chatting back and forth until i'm done with what i'm going to be doing.
that involves looking at the nol's and what might have to happen for shldq to participate in the holdco transaction.
