dragon,
you both stated/ask this:
imo... many glanced over the obvious on your post...
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Quote:
“ESL, we know, is a ‘qualified creditor’ of Sears,” so any stock it receives as part of the deal “would count positively towards satisfaction of the bankruptcy exception,” New York-based tax consultant Robert Willens told Bloomberg Tax in an email.
The proposal not only ensures that ESL will have access to Sears’ NOLs, but that the combined company won’t be “burdened” by the limitation under Section 382, he said.
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So, this would then be... How can they make that happen?
the Answer... Reverse Merger
Eddie and ESL give up their entire holdings of common shares that they paid dearly for and still own... just to give them up? Crazy. Ain't gonna happen.
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i don't agree with your conclusion and here's why.
after this article came out i corresponded with the author and we exchanged a number of emails.
his conclusion was consistent with mine which is that the continuity of interest requirement necessary for the acquisition to qualify as a 'G' reorganization can be met if the requisite amount of stock is issued solely to selected creditors, such as lampert.
he also agreed the NOLs will be inherited by transform holdco because of 'G' reorganization.
his article summarized the "G" reorganization requirements. i have inserted in each of these requirements how they have been satisfied.
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(i) Buyer acquires substantially all of Sear's assets. (the purchase by Transform Holdco satisfies this condition), (ii) Sears liquidates in pursuance to a plan of reorganization (although a por has not been filed, and Sears has both requested and received an extension to file its por, the Asset Purchase Agreement provides for Sears to liquidate and or dissolve within three years of the Closing Date of the sale transaction), (iii) at least one Sears shareholder receives ESL stock; or at least one security holder of Sears receives ESL stock or securities. (Lampert alone will satisfy this requirement and "at least one" doesn't seem to be able to be construed to include "all").
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when i ran the above by the author, he agreed with all of them.
now, specifically addressing the stock question, you may or may not remember that the asset purchase agreement provided that Transform Holdco was to provide a "securities consideration" to the seller.
thanks to linda1 who provided the following information which can be found in docket #2456 on page 148/155:
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All of the Class B Preferred Units of Newco received by SHC be will distributed to Holders of Senior Second Lien Obligations:
The Securities Consideration shall comprise 3,000 Class B Preferred Units of Newco, with an aggregate liquidation preference of $300,000 and otherwise subject to the terms and conditions set forth in the
Amended and Restated Limited Liability Company Operating Agreement of Newco as in effect on the Closing Date and as may be amended from time to time thereafter.
note: the newco referenced here is actually transform holdco
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since i had posted earlier that i was always looking for loopholes whereby lampert could just be the lone stockholder receiving shares in the new company he agreed. it was his feeling the continuity of interest requirement necessary for the acquisition to qualify as a 'G' reorganization could be met if the requisite amount of stock is issued solely to selected creditors, such as lampert. he also said there's no requirement that the stock to be issued is even to be disbursed among the various classes of creditors and felt it highly likely that is the approach lampert would take. he also didn't feel lampert would want any other creditors to obtain stock in Transform.
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it's important to remember in this type of transaction that creditors will be considered as stockholders. and, since eddie is a creditor he can satisfy the "stockholder" requirement by virtue of the fact he holds debt (i.e., he's a creditor)
in one of lampert's responses it was stated that back in 2007 his stock holdings in SHC (now, shldq) was worth $12 billion. around the time of the bankruptcy filing he said it was worth around $20 million.
eddie has already "given up" most of the value he had in what is now shldq. thanks to his $5.2 billion bid for substantially all of the "go-forward" assets of shc (which included the nols and tax credits) he has gotten everything he wanted. he currently is the 100% owner of transform holdco which includes all of the assets included in the asset purchase agreement.
so, if lampert can not create sufficient income to maximize the value of those nols and tax credits by operating the "go-forward" assets he purchased, he could actually merge parts or all of transform holdco (or whatever it comes to be called) with a "profitable" company and i don't believe that would be what's left of sears.
the only reason for a "reverse merger" with old sears (i.e. shc and what's left of it currently trading as shldq) would have been to realize the benefit of the nols and tax credits. however, since lampert already has those things, a reverse merger doesn't do anything for eddie.
in the meantime while things are being sorted out (meaning before lampert might decide to "go public") he will be doing those things which he said would be distasteful to stockholders. among those things might be closing/downsizing/repurposing some/most/all of the stores he is acquiring. expect continued layoffs coming from the ranks of the 45k employees "saved" by this deal. according to the asset purchase agreement, lampert is only required to retain those employees for 1 year. he will have plenty to do in that time without creating an uproar.
in reaction to a post on this board that eddie had filed for a corporation in the name of TF Orange Park, LLC in florida, i went on to the state of delaware corporate search site. there were many LLC's set up in various "TF" names (as in transform of transform holdco). notable among them were two for TF Hoffman Estates, both LLC's. These have all been done since lampert's bid was approved by judge drain.
i would speculate that one of the Hoffman Estate LLC's if for the 2.2 million sq ft of corporate office space which lampert will be carving out as a separate company. i would further speculate the other Hoffman Estate LLC is for the 200+/- acres of undeveloped property which also will be carved out as a separate company. there are many more and probably in each of the states in which transform holdco has obtained property interests.
so, all said and done, the above is why i don't think commons will survive.
as posted today, the only fly in the ointment i see is if lampert fails to obtain a favorable tax ruling that transform holdco can utilize the nols and tax credits which he has ALREADY purchased.
if that were to happen, which i doubt, then that is the only path i see which might provide benefit to shldq shareholders. there might be some small portion of the nols and/or tax credits left with shc/shldq as a result of lampert's credit bid. but for shc/shldq to realize any benefit from them they would have had to retain a significant portion of their business which originally gave rise to those nols and tax credits. don't know what that might be since all of the "good stuff' was sold to transform holdco and the remaining assets are being liquidated to pay off creditors.
shldq is not lampert. shldq is not the assets which were purchased by transform holdco. shldq doesn not currently control the nols and tax credits. the stock in transform holdco which eddie is providing as the "securities consideration" described in the asset purchase agreement will go right back to eddie via his status as a secured creditor. public relations releases under shc/shldq are only there because shc/shldq are debtors in possession and are required to do these things until the sale transaction is closed.
remember, lampert has filed a motion requesting the judge to authorize the appointment of a mediator to mediate a number of issues lampert has alleged ALL stemming from SHC/shldq's failure to continue acting is good faith as debtor's in possession and properly protecting and securing those assets until the closing takes place.
one of those actions was the p/r associated with the new line of craftsman tools. just because that was released by shc/shldq does not mean that shc/shldq still owns the craftsman trademark or the ability to manufacture/sell the new line.
they don't! it just means that shc/shldq has to continue with "business as usual" until the closing occurs and the things which lampert purchased are actually handed over to him (transform holdco).
