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Egan-Jones Downgrades Sears To Lowest Rating Above Default
Following today's increasingly more adverse news for Sears, which saw primary vendor funder CIT cut ties with the Eddie Lampert mega investment, it was only a matter of time before the market realized that the jig for the once bankrupt retailer may be up, and a Chapter 22 is the only possible option. Sure enough, the first to respond to this is the rating agency that not only is capable of forward looking activity, unlike all the other NRSROs, and also managed to get Jefferies to admit it had a far greater European exposure than the market was comfortable with (resulting in a major cut in gross and net, and a far greater transparency into its balance sheet). As of minutes ago, Egan Jones just downgraded Sears Holdings to the lowest rating just above default: C, from CC.
From Egan-Jones:
More problems - CIT's cutting factor financing for SHLD hurts. Like the book retailers (Barnes&Noble and Borders) electronic retailers (Circuit City and Blockbuster), SHLD is facing an existential challenge. SHLD is closing 120 Sears and K-Mart stores and the ability to dispose of the real-estate is questionable. Over the past five years annual operating income declined from $2.48B to $407M. TTM Oct. operating income declined from a $520M gain last year to a $158M loss this year while interest rose from $284M to $329M. Revenues for the Oct. 11 quarter were down 1.2% YoY. KMART same store sales were down .9% while Sears Domestic same store sales declined .7%. Internet sales rose 19% while Sears Canada same store sales.
The time may be right to bring back that one Zero Hedge feature from early 2009- the Death Clock, which is nowhere more applicable now than with SHLD. Our advice: ignore the stock price which is now purely a function of momo chasers in either direction, and just focus on the CDS.
Here is SHLD CDS:
...and SRAC - even worse.
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Like all the other bad news today, this is bullish! Risk on!
I smell a liquidation sale! And I need some new tools!
Today's liquidation sale was the dollar.
aka - "SHears Holdings"
Casualty Report/collateral damage:
Lampert chum Bruce Berkowitz -- of Fairholme Capital Management.
Fairholme Capital holds 16,270,000 shares -- or, 15.2% of the Company.
The problem with swinging for the fences ( Bruce ) is that there is always an outfielder waiting to make a routine play on a pop-fly. The handwriting has been on the wall for this one going back at least a dozen quarters.
Eddie Lampert tried to make buku $$$ by hatching a plan to buy an anemic, pathetic retailer (with a comatose retailer, Kmart, in tow), and turn it into a REIT, on the premise that there was time and air left in the commercial real estate bubble (created by Greesnpan & Bernanke).
Eddie Lampert and those who tied their hitch to his carriage got prison raped, and the fun's just begun.
Retailer carcasses are going to hit the floor en masse.
Everyday will be doorbuster special as the herd is culled.
After what Best Buy pulled on their online customers, I was expecting them to file for bankruptcy protection right after the first of the year, but I have heard nothing. Maybe I missed the announcement?
LOL! Checkout Fairholme's portfolio:
http://www.google.com/finance?q=MUTF:FAIRX#
Sears 7.92%
Bank of America 6.11%
Berkshire A & B(ag man) 7.9%
Fairholme Alpha -40.51 Beta 1.39 - those a "good" numbers. LOL!
He is bottom fishing in the sh*t pond. Warner Buffert O-ba-m-ah cannot beat the S&P 500. Berkowitz was fund manager of the decade by MStar/Money/Smart Money. What a joke.
Eddie Lampert and Berkowitz should be stuff in a Kenmore garbage disposal or Craftsman wood chipper. F***ng crooks.
Hey checkout that Fairholme Fund also owns CIT (factor) who are not going to factor for Sears anymore. He invests in Tarp or Buffett INc.
Now you can buy Sears on bluelight special at KMart... who is also available in a twin pack.
Tyler, please, the politically correct term is, "friends of trends."
Home Sheepo about to be flooded with extra shitty dewalt power tools
If you look at trade flow and P/C ratio, many are bullish on SHLD.
If anyone has any balls, SEARS secured corportes are trading hi-70's with a workout somewhere tween 90-100.
Backed by inventories and receivables. 812350AE6
Those inventories will probably need about a 50% markdown on clothing. Most Sears shoppers anymore can try to pay with food stamp credit cards.
Sears imploding:
http://www.youtube.com/watch?v=s-nvu4SlD54
So much for the market "durable goods" numbers. I bought appliances at sears for they had the best selection.
They are falling victim to too many people with too few dollars and that magic credit line.
Now if they can sell some more stock to raise cash like many do, but they don't seem to be any where near being a global concern.
The put option IV, implied Vol, is 40% higher than calls. I don't see a play but would not want to be holding this shitbag. Maybe robo can tell us how bullish they are.
I remember the good old days when I scooped off some coin off circuit city. Maybe exxon can buy them, like they did montgomery wards. Sears is the next monkee wards.
Buffet to the rescue?
If they had rated them at below default I'd be impressed.
There goes your DIE HARD warranties........................
...next up... HIGHEST RATING BELOW DEFAULT (so Eddie Lampert has that going for him)...
I heard Eddie Lampert is the next Warren Buffett...
Ha -- Hansel cracked the case: a while back, Cramer was beside himself proclaiming SHLD as potentially, "the next Berkshire Hathaway." Laughable, the predictable patterns of these media lemmings.
yeah i remember when Cramer was all over SHLD after his buddy Lampert bought it out; Cramer extolled Eddie to no end over his genius at buying up all that dirt-cheap Sears and Kmart real estate. Yeah, Eddie was probably waiting to unload it all when RE came back up, but it never did.
Has Cramer ever come back to say, "sell sell sell!!!"???
Cramer, eat my shit.
What is with this Lampert - Buffett- Bruce Berkowitz (Fairholme) connection??? Fairholme owns Sears, AIG, Buffett's stock, Bank of America, Citigroup,
Seems like a TARP/Buffet portfolio.
My guess is Buffet will buy some of Sears real estate,
Circle jerks....
BTFD bitchez
They cannot liquidate enough to plug all the holes taking on water...
Stick a fork in 'em.
"Hmmm, I know Sears sells printers...I have an idea that's worked on other insolvent failures, so hear me out..." - The Bernank
I love Sears
One of the best box stores IMO...RIP
Sad days for America
Have you been in a Sears lately? They sell crap. Kimmy K klothing line, Shakira perfume, fake jewelry, overpriced cookware, overpriced furniture; it's all crap.
Let's invite in TRAV to tell us who shops at Sears...
Sleepy-eyed Mexicans make up the majority of shoppers at the local Sears, and they don't appear to be doing much buying.
Shopping for Oba voters in stores owned by Oba voters.
Prince Edward Islanders?
They sell some very decent hand tools, yard tools, and accessories... and, quite often, at door buster prices... if you're inclined to wait for the deals.
Yes its true that they headed down the Kmart path.
Hence the CDS vultures circling
Guess I'm waxing nostalgic of the past 30yrs before the move from quality to quantity.
Kinda like our government
Not to mention the rip-off artists hawking car repairs and tires. Although that's normal for the entire automotive repair industry these days.
@ Aerojet
I did that while going to college. I felt dirty everytime I got there for work, a den of thieves, Left after 6 months, this was before I knew that this is how nearly every business worked. Take advantage every chance you get.
Yep. Agree. And their wekaness reflects a big weakness in a critical nitch: US mid-market consumers. Serious weakness where it counts. Biflation taking its toll. Ripple effects to follow.
I'm just waiting for the day that Howard Cunningham's Hardware Store (from 'Happy Days'), buys them out...
EBITDA down 40% on an LTM basis... nothing more to say,i it's death for any retail name.
I remember Howard Davidowitz calling this YEARS ago on a Bloomberg radio interview. The show host was talking to him like he was a child unable to comprehend the "genius" of Lampert's financial engineering. Somewhere, he is smiling to himself and hopefully making a killing on a SHLD short position. As an aside, who would have thought 2 ex-Squid employees actually could be at ODDS with each other instead of in BED with each other.... Brings a tear to the ol EYE.
Sean Egan = Honeybadger.
honeybadgers don't give a shit.. Oo look - he's eating a snake!
In other news zerohedge didnt make the Homeland Security list. Kind of insulting.
I'm confident ZH and discussed subject matter IS on thier list, it's just the 1 your not allowed to see...
J.E. Hoover is dead. The ' files ' live forever.
J.E. Hoover is a dead homosexualist. F--- that closeted, dangerous, vindictive piece of shit forever.
riphowardkatz
In other news ZH didnt make the Homeland Security list. Kind of insulting
IF you believe that, I have some Swampland in So Tx for sale.The numbers prnted are the size of a gnat turd compared to who is being watched,and recorded.
Why Drudge?, I mean really,HuffPo???................frigging jokes.
Buffet will swoop in and buy $2b of new SHLD convertible preferreds at a $20 trigger price soon, once he gets out of the bath.
once he gets out of the bath.
Whereby... He'll promptly get back in...
So bullish.
Move over MBS's...Here comes SBS...Sears Backed Securities...
Sears Baked Securities.
Fixed it.
Admittedly...That is better...
Personally, I like(d) Sears...Just too many places to shop and too little money to spend...High end retailers doin' just fine though...
A little Sears history for ZH'ers.
I worked for Sears in the 70's and 80's when Sears was at the top of their game. A twenty year old with a bright future with a top retailer. I climbed the corporate ladder quickly only to see the bottom fall out as my peers and I saw management ignore a small Arkansas company opening stores next to our rural catalog stores while executives denied their existence. Next 6 figure types built the big phallus symbol in Chicago and altered our successful business model to become a centralized behemoth, abandoning the local buying and feedback of local demand for short term profits.
The death knell was hiring CEO, Ed Brennan, who sealed the fate of the largest retailer in the world. His arrogance and ego would not allow him to listen to the twenty something executives who shouted out about the bad decisions. Ed was a corporate prick just like his brother Bernard who crashed Montgomery Wards. These 2 brothers dismantled two historic retailers for their own gain over and above the stockholders and employees.
When Sears canned knowledgeable commissioned salesmen for snotty teenage girls, the young turks of Sears said enough is enough. We decided not to ride the bitch down. See you later Sears, hate to see you go. You once were a beautiful lady but you were fucked over by Ed and bunch of greedy corporate bastards that hurt a lot of good Americans.
A side note to older ZH members. Other than National Geographic magazines the old Sears catalog is best remembered by most young boys as they eagerly anticipated the arrival of the latest Spring or Summer catalog featuring the latest bras and panties in the privacy of the family bathroom.
CD... you know what I am talking about.... heh. The Internet generation has no idea what I am talking about.
Find . . . Sears . . . Edit/Copy . . . . . Find . . . . . Motorola . . . . . Edit . . . . . Paste.
Story is identical - only difference is the names. Great company falls victim to its own arrogance, corporate pricks, lawyers, and banksters take over, all the good people seek greener pastures, and down to oblivion she goes. Now, Motorola (Solutions) is a wholly owned subsidiary of the Gubmint (to whom 2/3 of their sales go). Anybody left there now is a complete relic, paranoid cubicle mole.
some more sears history...
my grandfather bought his oklahoma farm house out of a sears catalogue in 1911. it was delivered in pieces and he assembled it. it was called a "craftsman" and had all the attributes.
those fucking greedy bastards...
One of my houses was built in 1914, the original part of the house was bought and built from the Sears catalogue. The previous owner added to the house, quite substantially, but the original part of the house still exists, mostly the kitchen now.
+1 Sad
I see another fellow mentioned Motorola. Sears and MOT came from Illinois. What else came from their? Hillary and the Islamic.
Zerohedge is on the non-published list.
if so then I say Napalitano I hope your hate for man eventually consumes you, it has already disfigured you.
Are we on the no-fly list yet?
As we were saying this morning, there's a wave of corporate bankruptcies already in progress. All the ill-gotten stimulus and Fed money from 09-10 has dried up. They are all companies that haven't offshored to Asia in a meaningful way
Obviously, Homeland Security needs to speak with Sean Egan-Jones.
Rest assured fast Eddie will get most of his money back, if he hasn't already. Local communities will get stuck holding the big box bag when these dinasours can't be sold. Craftsman will be sold but I doubt even it can survive as there are plenty of competitors equal or better.
Just too many retailers for too little demand. The weak will get culled. Ongoing.
he's running the same bust-out operation with Autozone too. unloading massive amounts of his personal holdings while directing the company to buyback shares (at NFLX-like nosebleed prices) with ever-increasing debt. all while accts payable is 130% of inventory plus receivables - soon they too will stop getting vendor financing.
Interesting. Do you have any links which give more details on Autozone. The share price is at an all time high.
i just took the inventory/payables ratio from their most recent quarterly balance sheet. annual is here:
http://finance.yahoo.com/q/bs?s=AZO+Balance+Sheet&annual
note the continuously declining shareholder equity and continuously increasing debt. and eddie has been dumping like a madman during their buyback run-up:
http://finance.yahoo.com/q/it?s=AZO+Insider+Transactions
and one of their many buyback authorizations is here:
http://phx.corporate-ir.net/phoenix.zhtml?c=76792&p=irol-newsArticle&ID=...
if they have the slightest decrease in margins or increase in borrowing costs then they're screwed (which they probably are no matrer what). the float is small with AZO so they can certainly game the share price for a while though.
Yup. Another scumbag!
I always knew there was something truly f'd up at Autozone, a total stock scam but I didn't know the culprit. Fuck good old Ed looks to have sold off a few hundred million dollars worth of stock. One hell of a golden parachute.
These people need to be shot.
So. Thats SHLD going down for the count. Next?
Can't be great news for 'Wally World', can it?
I heard the chocolate ration will be raised to 20 grams a week from 30 grams! Risk on!
The chocolate ration was always 10 grams, the 30 grams figure was a misprint.
ZH is incahoots with HS.
The Inca Empire has nothing to do with this. Get more oxygen to your brain.
Exploding Internet sales have to be taking a big chunk out of big box retail sales. The worst is reserved for those behemoths that own too many depreciating boxes. In 2 years, CMBS will vaporize in a cloud of 'for lease or sale' signs due to gross structual oversupply in the retail space.
Rainman
Sears is sold tax free to out of your state consumers on the Net, so that isn't it.
Thank you for calling Shear's, my name Peggy..........
Key News for 12 Jan 2012 driving the markets
http://fnn24.com/?p=36462
When should we start buying puts?
I gave up on Sears 2 decades ago. Death by Wal-Mart.
Heckuva job Eddie after pillaging hundreds of billions for yourself!
Equity markets are honeybadger....dont give a shit! The Crazy Nastyass Honey Badger (original narration by Randall) - YouTube
Nothin but bad news out cant keep honeybadger stocks from recovering....Oooo look its eating a snake, and it got bit! Thats enough vemon to kill a rhinocerous, but honeybadger stocks dont care it just needs a 5 minute nap and full recovery!
This is what decades of selling junk and attempting to charge top dollar for it will accomplish.
Crapsman tools anyone?
You say that, but my basic set of tools from there has fixed three different cars numerous times. I'm pretty happy with them.
Whoa pits - I'm a tool freak:
I bought my basic set of 1/2 inch socket (metric and US) and box/open end Craftsman tools and toolbox 40 plus years ago as I left the city. Seven cars, two pickups, 4 weedeaters, half-dozen chain saws, one big ass shredder/grinder, 2 aircraft and foundation bolts on 5 buildings later, they (toolbox included - beat up and repainted once) are still going strong, along with assorted additional Craftsman stuff bought along the way that have seriously overloaded the original tool box.
These sons of bitches have seen a LOT of use over the years - the only one that finally gave up was the tourque wrench, which is still in use as a big wrench for my water purifier. Whatever else is wrong with Sears and their products (lots), the Craftsman line of manual tools ain't one of them.
There power tools used to be really good as well, but ain't so hot, in my experience, any more. - but their hand tools are still the best cost/value tools you can find.
NFP
I'm sure they were good tools and I'm sure Sears was good 40 years ago. But in my lifetime, it was all downhill. Now its basically just a glorified Wal-Mart for elderly white trash sorta outfit.
I think that all this unjustified bullishness given the dismal economic numbers it due to the high probability that the FED is going to unleash a large LSAP program and target MBS. The big boys know it is coming along with an ECB print job. That is why crap companies like Hovnanian Enterprises and BAC have been going up. Check out the home builders as a group, going up the last couple weeks, the only thing I can think of is that people must betting that a QE/LSAP must be bullish for the real estate market and ease some pressure from crap banks holding a lot of bad paper.
Cool...then what? Back to square 1 the next day, except now with oil floor firm at $120 and gold at $2,000? Ok whatever.
I am not saying its a good thing, just what I think might happen. I don't think the TPTB care about 2k gold or high oil prices.
SPG is still near all time high. great.
I worked at Sears until April 2011. It was a terrible company with a failed business model. They used to sell quality appliances, now they're junk appliances that break consistently.
Not surprisingly, the free fall began in May 2011. I was carrying the company, bros.
Kodak, Sears - 100+ year old American icons collapsing in a climate of no job growth, declining real wages, thousands more middle class homes going empty each month, less and less Americans with health insurance each month, a banker of a president and a bought-and-paid-for Congress, and a Federal Reserve loving, bailout loving, money printing loving Wall Street Mormon layoff artist on deck as the savior.
Bullish!
The web continues to eat away at traditional retail.
Just last week, I ordered a muffler/tailpipe assembly/clamps/gasket on Amazon on Tuesday for $108 delivered, it was in my carport when I got home Fri, had it installed Sat at local garage for $75, total cost $183. Midas wanted $500.
Yesterday, I needed a toner cartridge for an old HP office printer. Office Depot wanted $108 for one, plus tax, but would have had to order it. I ordered two of exact same new cartridges, on Amazon, delivered, for $30 all in combined.
I bought a washer/dryer set from SHLD 2 years ago. I had to arrange shipping. I had to haggle with some amigo in the Phillipines for twenty minutes to arrange LOCAL shipping from about 15 minutes away.
Sears was a great middle-class store 40 years ago when I was a kid. it was hollowed out like the U.S. middle class has been hollowed out. Good riddance.
and Egan Jones downgrades Portugal....
It is hard to watch a company like Sears fall like this. For much of history they WERE the name in retailing, in merchandise, in mail-order, and they had a presence all across America, whether in actual retail storefronts or with that humongous catalog that everyone had. You could live on the western frontier and in the middle of nowhere and have all the amenities of someone in the city. Hell you could order a HOUSE and have it delivered to you in parts! Sears embodied the ingenuity and hard-work that built America. But that has started to slip. Not just Sears but America as a whole.
Sears has almost too big to be able to react to the market. You go into their stores and much of it feels like a government office. The clerks don't go out of their way to help you, the customer service feels like going to see a surly DMV worker, they act like they are not in a business and that they don't have any competition. Maybe for part of history that was true. But now it is not.
Sears needs to make some big changes to survive. They have too many parts of the store that are wasted real estate and aren't making money. Rather than try to compete with the Wal-Marts of the world they need to get rid of like 70% of the store and stick to some core product lines that they outshine everyone on.
I guess my plan for all of this is for Sears to cut down to a really neat tool, power equipment and automotive repair shop. It is a fraction of the floor space. They are good at these product lines. They compete less. You can put one of these stores just about anywhere, urban and rural, as the store size is a lot smaller.
I hate to use Jack Welch's GE philosophy (it probably sounds cliche to you guys) but if you can't be #1 in what you do you shouldn't be doing it. For they stuff they are good at they need to stick with it! For the things they are middle-of-the-road on they either need to become the name in it or they need to totally get away from it. Sears was the Amazon of its time - it was mail-order, had a ton of stuff and could deliver it for reasonable prices. Now instead of a 1000-page catalog we all have computers. I don't see them slashing costs down to the level of an Amazon, Newegg or other large online competitor. Their mail-order business is largely dead. But they could take what they are strong with and run with it.
Kmart? Wow that is a whole new discussion. I don't know how that place is still alive, except for the Kmarts in the ghetto where that is the ONLY place to shop. It is as if Kmart just pretended that none of its competitors existed for like 30 yrs and somehow God keeps them alive. I can't find any core competencies to that store. They really should all go. They aren't even trying. Or even better... since a Kmart is probably a fraction of the size of a current Sears store... kill the Kmart, remodel it to be my carved-down Sears store concept then move it there! Move the Sears off-mall (less real estate cost). The real estate is never coming back. The idea of the shopping mall itself is rapidly dying, get away from that Titanic!