Okay I have to put all this here as I started this out with you guys I will finish in as bringing whatever we dig up and our opinions that are arrived at although not through concrete it is thins this and this, but, just some obvious things, anyone that has any input to the contrary lumber up to the bar and laid it out.
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Daily does of Stock Porn
Okay just member this is first what I wrote this morning and put together to lay all out, in a rational manner. Then it goes into two email replies I got from a friend in CA who is in the money manager game etc.
Got into this thing with ya not going to leave half way through but after the story is revealed (I am out) by all those involved, company, GGC, lenders etc because something is going on it is painfully obvious through leaked rumors by lenders side no doubt to Post/Bloomberg, the sale of 17.5 million shares "ope market" which is a term used in describing these type sales used in sales, mergers etc, the late night PR informing of a ER a week and a half later, the following Monday the 13D hitting SEC 2 days after the transaction as it should be above board.
The CEO in CC being ambiguous to certain things he was discussing ie sale of Lanes, paying some debt early etc. and a very awkward moment when GS analyst tried to get more detailed about the possible early payment of debt or buying it off the open market there being a slight pause and Carrie jumping in to answer the question and they pretty much said to a person we are working on it, we will sort it out, it is being sorted out.
First and foremost the leaks which are ongoing have been ongoing and seem to be coming to a head/close. The leaks first to the post was Wall Street negotiation 101. Put the other sides feet to the fire in the public forum and get their shareholders speculating about anything but something positive, the endless media retells will sort that, then the Bloomberg leak which comes after an PR of the ER and 10K issuance is almost over a week late, finally getting an early evening release that it will be the following Thursday a week and a half later? Trying to wrap things up, want to avoid questions about 17.5 mil share transaction that will hit a week later so have it 3 days after that, let the dust settle? Which by the way after the 13D was released did one tute etc or market maker try to take the stock down, I mean it was for .17 a share, not the stock went up? Then have a CC and not say boo about it.
Then GGC why would they do that? They wouldn't unless it was part of something,everyone and their brother knows now and GGC certainly did then, that BK etc was never happening. They don't take a hit like that even through one of their shell holding companies out of the Cayman Islands unless it is part of a deal a big deal, to A) get the tax break under this one shell, give the buyer a deal on the other end. B) Get in someway somehow a discount on what you are buying to still get an offset on your share $$ loss which was huge, and the one you are doing a deal also makes out reporting a deal done with less cash but sorting out a large problem SP easiest way to sort out a SP problem take almost 9% of the float out of the picture, done period. Each gets something. The cancelling of share deals with all employees and coming out with new plan and warrant plan everyone file your new Form-4.
CC day ambiguous talking around certain things, just saying we are at it, and it is going to be good and is good for all etc. And something which blows my mind, not that they 17.5 mil shares get sold at a discount and stock goes up didn't as well, but, the 10K wasn't released this has never happened. Always has been day of, I checked, now ER was week and a half late with the extra time don't tell me it still needed some kinks worked out, unless all the kinks aren't ready, note that one down, will come in handy later in our story. There is no 13G filed by the buyer of the shares this can only happen, only if it is the company that buys them and the company already has in place a share buyback program. Now one reason this is also interesting the entire shares as part of the deal is due to the terms of the loan. Except in certain cases/instances/clauses/lawyer double talk they have to use the asset sale $$ to pay back debt to the lenders.
I believe as do those I mentioned going through all this with, that that sticking point but one the company was obviously right as they won the argument evidently is why the story was leaked to the post, that $200 million from Maurice's company said it is ours to use, lenders said no its ours that's the deal in the contract, lender has flunky (Harvard,Yale flunky, but fresh out of Uni. all flunkies) leak Post report, Wall Street negotiation tactics 101, put the other guys feet to the fire, media questions, shareholder questions stock pressure, everuone else picks up story reprints, etc it is effecting, sent the stock under a buck and eventfully to the .20's for a minute. But I say the company won that arfument as they kept the money AND they reiterated that fact in the CC and stated I might add that it followed stipulations that the money HAD to go back into operations
(not capex operations only take care of other issues pressing that will alleviate the companies position to operate successfully and profitably going forward. As in saying if you don't give it to us, you make damn sure you use it to put out some fire so going forward you can pay us when the time comes. As they don't owe a nickel til 2020 and the bulk 2023 all this BS over debt 3 years from now is BS the next leaked story to Bloomberg with the reiteration that debt should be paid down with the money if the sale goes through is obvious they are saying in the public, okay you got that $200 mil to use to take care of closing shops etc and be ready to go forward profitable and healthy, but, this next go round we will have out hands out you can bet that shit. Now I will post an exchange with the financial/money manager I have been going around this with. Remember all that has been pointed out it becomes clearer as you put the two together, hint especially the 10K thing and why.
The more I put all the pieces together, the more I am convinced they are negotiating with the lenders. It appears that the Term Loan does have a condition where if they sell an asset, they need to use the proceeds to pay down debt (there is one sort of exception which they probably used for the Maurices money, since they claim they are in full compliance.
But now my guess is that they are on the verge of closing a few more deals (Lane.GGC, dressbarn ip) and will have perhaps another $500 million in cash, which normally they would need to use to pay down debt. But my guess is that they are saying to the lenders, we need some give and take, such as keeping some extra cash for operations, a discount for paying off early, perhaps an extension of the due date, and maybe an interest rate reduction, maybe offering some warrants. They used the term "optimize capital structure" five times on the call (the previous call was zero times) which to me means debt is involved. Also these new directors they added seem like debt renegotiation pitbulls. Also, recall the rumors that lenders hired Greenhill and also Milbank, so I'm sure they are all in a room thrashing it out.
I hope they also buy back some debt and stock in the open market, but we'll have to see.
In any event, I think the outcome will be good for us. Like Carrie said on the call, they are being very thoughtful about it.
That's my take.
Here's some of the excerpts from the Loan doc. Pain in the ass to understand though.
“Prepayment Event” means:
(a) any Asset Sale, including any sale or issuance to a Person other than the Parent Borrower or any Restricted Subsidiary of Equity Interests in any Subsidiary, other than (i) dispositions described in clauses (a) through (f) of Section 6.05 and (ii) other dispositions resulting in aggregate Net Proceeds not exceeding $25,000,000 for any individual transactions or series of related transactions;
(b) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any asset of the Parent Borrower or any Restricted Subsidiary resulting in aggregate Net Proceeds exceeding $25,000,000; or
(c) the incurrence by the Parent Borrower or any Restricted Subsidiary of any Indebtedness, other than any Indebtedness permitted to be incurred by Section 6.01 other than Refinancing Term Loans and Refinancing Debt Securities.
“Proceeds Collateral Account” means a Deposit Account in which the Net Proceeds of Term Priority Collateral in respect of any Prepayment Event described in clause (a) or (b) of the definition of the term “Prepayment Event” are deposited by the Parent Borrower or any Restricted Subsidiary to be held pending release as contemplated by Section 2.09(b) for reinvestment or prepayment, and which has no other funds contained therein (other than interest on any such proceeds) and is subject to a Control Agreement in favor of the Administrative Agent.
SECTION 2.09. Prepayment of Loans.
(a) The Borrowers shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to the requirements of this Section.
(b) In the event and on each occasion that any Net Proceeds are received by or on behalf of the Parent Borrower or any Restricted Subsidiary in respect of any Prepayment Event, the Borrowers shall, on the day such Net Proceeds are received (or, in the case of a Prepayment Event described in clause (a) or (b) of the definition of the term “Prepayment Event,” within five Business Days after such Net Proceeds are received), prepay Borrowings in an amount equal to 100% of such Net Proceeds; provided that, in the case of any event described in clause (a) or (b) of the definition of the term “Prepayment Event,” if the Parent Borrower shall
(i) prior to the date of the required prepayment, deliver to the Administrative Agent a certificate of a Financial Officer of the Parent Borrower to the effect that the Borrowers intend to cause the Net Proceeds from such event (or a portion thereof specified in such certificate) to be applied or to enter into an agreement to cause such Net Proceeds to be applied within 365 days after receipt of such Net Proceeds to acquire real property, equipment or other tangible assets to be used in the business of the Parent Borrower or the Restricted Subsidiaries, or to consummate any Permitted Acquisition (or any other acquisition of all or substantially all the assets of (or all or substantially all the assets constituting a business unit, division, product line or line of business of) any Person) permitted hereunder, or, in the case of any event described in clause (b) of the definition of the term “Prepayment Event”, to restore the asset affected by such event, and certifying that no Event of Default has occurred and is continuing, and
(ii) in the case of a sale of Term Priority Collateral, deposit all such Net Proceeds in a Proceeds Collateral Account pending such application, then no prepayment shall be required pursuant to this paragraph in respect of the Net Proceeds from such event (or the portion of such Net Proceeds specified in such certificate, if applicable) except to the extent of any such Net Proceeds that have not been so applied by the end of such 365-day period (or within a period of 180 days thereafter if by the end of such initial 365-day period the Parent Borrower or one or more Restricted Subsidiaries shall have entered into an agreement with a third party to acquire such real property, equipment or other tangible assets, or to consummate such Permitted Acquisition or other acquisition, with such Net Proceeds), at which time a prepayment shall be required in an amount equal to the Net Proceeds that have not been so applied (and no prepayment shall be required to the extent the aggregate amount of such Net Proceeds that are not reinvested in accordance with this Section does not exceed $25,000,000 in any fiscal year).
It seems like last year they reported earnings on Sep 24 and also filed the 10K on the same day. If you look at any 10K, on the first page they always show at the bottom the number of shares outstanding, and it is usually up to the date of publication. Last year for ASNA they showed it up to Sep 20 (Thursday) and filed on Monday 24th. Besides that, it's normally always reported as a subsequent event in the 10K. So I think one way or another if they bought the share back, the 10K will show it.
Will be interesting to see the short interest tomorrow.
Yeah, agree it would be nice to be a fly on the wall. That's what makes these situations interesting; it's like a bit of a detective puzzle. There are still a few unknowns but overall I can't see any big obstacles, and the company has been pretty good at communicating honestly in my opinion. I think they are still working through the dressbarn landlord holdouts as well.
From the lender's point of view, they want to get some money back and reduce risk, but it's also in their interest to see the company thrive, so they also want to make sure that the company is left with enough cash so that they don't run into cash flow problems. I visualize a situation at the moment where ASNA has a few deals in escrow ready to close, but before they close them, want to extract some concessions from the lenders; for example "we have deals for Lane, Catherines and dressbarn ip which are ready to go, but if we have to hand over all the proceeds to you (lender) then maybe we won't sell them" Lender will likely say "no, please sell them and we'll help you with some debt restructuring". I see something like - pay lender $600 million for $700 million debt reduction; ASNA keeps $200 million in cash, remaining debt maturity extended by 2 years and interest rate reduced by 1% -
ust a guess, but something like that hopefully. Then hopefully, on the side, they also buy back some debt and equity in the open market. The good news is that even if we get zero concessions from the lender, we are still in fine shape; lender concessions are just a bonus in my opinion and we will get something. This new director who is also on the board of Frontier seems like the kind of guy you want in your corner. It's obvious to me that the NY Post has an informant among the lenders somewhere; Bloomberg seemed to have the inside track on the Plus sale.
The more I put all the pieces together, the more I am convinced they are negotiating with the lenders. It appears that the Term Loan does have a condition where if they sell an asset, they need to use the proceeds to pay down debt (there is one sort of exception which they probably used for the Maurices money, since they reiterated they are in full compliance.
There is a dance going on, maybe even a mosh pit at times, and I am not invited which I am put off by, why? I'm a nice guy, I don't dance but I do a mean wall flower. Well my buddies and I are peaking in the window a bit and trying to figure out what we can using common sense, 10K that is a key with the share as look at last years and before had "shares up to and including that date" They haven't said or talked about them because they cannot talk about them, IMHO plain and simple, they are part for something bigger and more complicated and things that are involved in such matters are not to be discussed.
Can you just imagine the questions that would be asked if the 10K was released as usually and that share count showed 17.5 million more shares? JMHO but it is looking at things with 20/20 vision.
Peace out.
