Thanks, but I really should stop and proofread prior to posting, its just I get on a roll with my hen pecking and it just flows out.
I was having a discussion with someone and they said what they thought that ASNA would be better off buying some of their long term debt off the market because it is at discount and they are becoming cash flow positive at the moment with an increasing cash position it would be the smarter move going forward. The market would like it.
Then I mentioned the stock buy back as well to someone else and they thought I was wrong as well that buying back debt debt with $200 million to drop the long term debt down to 1 billion or under.
I totally disagree, they already paid in advance 2 years of interest payments so that before heading into this plan of closing Dress Barns and selling Maurice's and closing under performing stores so that it can be profitable and leaner starting Jan 2020 the debt issue would not be an issue.
Well the market/media still made it a big deal, I think it would be the stupidest thing in the world to buy any of that debt at the moment before sorting out the share price issue.
Over the years I have been in multiple companies with the same issue, they all took different actions. One bought debt only the minute they started building cash and operating on a positive cash flow basis they would buy debt off the market when they had an increase in cash of 200-300 million, never buying any stock. Every time it was PRed that they had bought debt the stock would run and then settle back, higher than before but not deserving of what they did.
It happened multiple times till they had almost all their debt paid back and in the end refinanced it and all was well and the stock returned to normal levels with a slight 10% downward adjustment.
One did both they like Ascena had a stock repurchase plan and they just after the quarter ended bought debt back with the excess cash they had built up the two previous quarters. The stock went up and continued to rise into earnings.
Well when the 10Q was released it showed they had also bought their stock under .50 throughout that quarter the stock shot to new highs and never came back. I was a new shareholder buying the bottom as I do, knowing it would come back was ecstatic I made well over what I had anticipated and slowly sold the position over the next three years.
You know who was over the moon happy, the poor guys that had been stuck in from before the problems and loaded the bottom. to bring their CB down. The company had bought 16.5% of the OS shares back, they could have bought another 21.6 million of debt back, but decided to buy stock back as well as they saw an opportunity.
There are many avenues, but, as in the company that just kept buying debt to keep the price up, which the shorts ran back down every time it was like being on a roller coaster. That was one of the only long plays I actively traded a part of my sack before it was at a double/triple before I started selling a little, I didn't keep the money I just bought more every time they pushed it down with the profits, compounding the money.
To me I think the two fellows that disagree with me are a bit naive or maybe have not been or seen a similar situation and seen both methods used, myself always searching for the orphan that will become healthy again have.
It is painfully obvious laying out huge sums before it is due, in this case 3 years from now to try and help a stock go up to give the market confidence doesn't work.
Their careful planning and thoughtful thinking before they went into the resizing of the business obviously scored them no points in the market, it did with holders of the stock that they were being prudent, but not hedge funds and short sellers and the media.
Why throw even more money you don't have to for years down the road or even the next years interest payments (2021) it will do not good, what will is a phone call saying I need those shares back. Or short sellers in the market not being able to find shares to short the stock.
No debt payments for a year long term debt 3 years from now, increasing cash position, increasing cash flow from operations, cutting costs in a major way so that Jan 2020 out its a whole new game, "Papa's got a brand new bag" as it were.
Buy $10-12 million in stock back or throw $100's of millions to the bankers that you don't have to, and didn't get anything but bad press and a stock that got ungraciously crucified by short sellers. I think anyone with half an ounce of sense would pick the former as the latter has already been tried and they spit in your face, well tell the market the shares aren't any good we will just buy them back for nothing, have a nice day.
Like I said I have seen it both ways, they both worked, the first was more frustrating as it was like being on a roller coaster. And the company operated under the gun constantly.
Because when they have you down nothing you can do is good enough, there is always something else. First it was To many heads under the umbrella okay, sell Maurice's get $200 million and get some room under the umbrella.
Popped then they sent it down again, no leases with Dress barn big problem may go bankrupt as it will eat up the Maurice's $200 and the million you have and the business isn't generating any cash.
Okay sort out the Dress barn leases and start closing others cutting costs and liquidating other under performers, check did that, oh but now you are going to burn through cash still bankruptcy issue, okay they cut capex last quarter and going forward and they are now generating cash from operations which will grow Q o Q as less losing stores every quarter from closed under performers and closed Dress Barns (75 total 45 DB) with the following quarter 75-100 DB closing further cutting costs going forward increasing cash from operations etc. No that still not good enough. Now, your debt is selling at a discount, its not owed for 3 years but that doesn't matter.
It will never end, its a case of they will always have an issue they can pump and spin the the media, one thing stops them, and solves your stock price issue using $10-12 or even $15 million to buy back a ton of shares as they are selling due to an extremely high short interest for 1/8 their book value. Then and only then would I when they have extra cash buy any debt back.
Everyone can have their own opinion, and I have seen it work both ways, the paying debt early worked as it did the last time they threw $200 million at the bankers, up and stable for a time, then on will come the negative stories in the media and a ton of negative press they work hand in hand.
Spend some pocket change to make the float and OS shrink drastically and for good, then buy debt back.
I personally as everyone knows think that is what/is happening as they have to solve the share price issue and that can only be done buy buying the stock off the market and forcing large hedges to get off the stock by causing a massive squeeze, buying long term debt not owed for three years,? No. Throwing another $200 million at the bankers will do zero long term. But we shall see, I think it would be foolish to buy debt back before buying shares back, throwing money at bankers they already know doesn't work.
I want them buying shares even before a Lane Bryant sale which is still in the works, or whatever else happens, trust me anyone holding this stock wants them to use even 2-3 million to buy 10 million shares of the float back, preferable 20 mil share though. Stock will pop and run with Lane sale, its a big deal lose a loser in Catherine's and gain 500-600 million, but do that after you have quietly bough up stock now that is a runaway train.
Been there, rode the ride its all they said it would be, and more.
And that is my opinion.
Peace out.
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