Seriously, do these dudes ever learn? Every cycle is the same thing: build, scrap, build, scrap. Looks like we are at the build part of the cycle. Or, maybe more accurate, at the end, as significant quantities of vessels go online. We are old enough to remember Hanjin Shipping.
Bankruptcy Code Section 4:20. Just kidding...the bankruptcy code isn't available for folks who make money off of weed.
Busted Tech. Answers.com takes a stray bullet in this piece about IAC's plans to shut down About.com. The fact that About.com has actually still been running this whole time renders us - yes, even us - speechless. Meanwhile, more busted tech is coming...soon. On the flip side, Quora is now a unicorn so who the hell really knows?
Canada. Housing is looking like an oncoming disaster - particularly in Toronto - and blood is appearing in the water.
Casual Dining. Quietly, a NYC mainstay is disappearing.
Dead Malls/Investing. David Simon's optimism notwithstanding (see above), everyone is all over the "short the malls" thesis - now even extending it to the "A Malls" that, prior to recently, were generally considered to be impervious to this retail malaise (note: there's over $1b of short interest on SPG currently). And this guy from Alder Hill Management LP is the poster child. (Let us know if you want his report: PETITION has it.) Some are throwing shade all over this hype. Finally, according to this, maybe we should all be doing a better job to ensure that algorithmic shopping doesn't gain more ground and malls actually DO survive.
Oil & Gas. Nothing like a good old corruption allegation that embroils multiple law firms and a private equity shop to help push a company (here, Cobalt International Energy) closer to bankruptcy (paywall).
Oil & Gas II. Wait. So now we're at an oil and gas deficit?!
Retail II (Jamming like a Boss). While Gibson Brands was able to refinance its debt and push out issues, Guitar Center is looking increasingly troubled. Given that the company is private equity-owned, undoubtedly there is an over-leverage story here (like with all other PE-owned retail), but we wonder whether the show-room trend is particularly applicable to this kind of business. We asked our artsy friends and one of them openly admitted to strapping in at the local GC and then purchasing on Amazon. The pricing was the same and he didn't have to worry about lugging it home. We find the in-store lessons narrative dubious as well. There are countless online resources for learning guitar - YouTube, most notably. Meanwhile, we enjoyed this decidedly millennial take on the death of retail.
Retail (Canadian Lumber Edition). Kidding, more like Canadian cashmere. Washable cashmere company Kit and Ace is restructuring in an additional acknowledgement that brick-and-mortar retail is tough - even if you're a VERY proven founder of successful apparel companies (in this case, Lululemon). Choice quote within: "Really it was just another store." Something tells us "Just another store" won't be part of the restructured company's marketing strategy.
Solar. SunEdison. Sungevity. Suniva. Verengo. SolarCity. Okay, just kidding about the last one but who knows what would've happened sans Elon Musk's Tesla/Solarcity merger shenanigans. Now Heliopower. We know many of you know the solar story: too much subsidy, too much debt, flooded supply from China pressuring margins, yadda yadda yadda. But we wonder if any of you have a notion with respect to a potential successful business model. We're serious: we're crowdsourcing your view here...
Taxis. Calling for a bailout.
The Profit. That's what Marcus Lemonis calls his CNBC show and now we'll get to see whether he can make some with the Camping World-led purchase of select portions of the Gander Mountain business in bankruptcy.
Fast Forward (Beauty). Uh oh. We noted last week that beauty category has been largely e-commerce resistant. Well, maybe not.
Rewind I (Bueller, Bueller). Get on with it already. Takata has become the new Westinghouse. Lots of noise. Just a matter of when. And, shocker! iHeartMedia's proposed subscription service with Napster - YES, NAPSTER - hasn't helped generate enough revenue to counteract $20b of debt.
Rewind II (Literally): We are as guilty as anyone hyping up the potential of autonomous cars but if anything is indicative of the wholesale difficulty to achieve 100% adoption, it's this piece about surviving Blockbuster franchises. Suffice it to say, there won't be driverless cars rocking the streets of Alaska anytime soon.
Rewind III (Shipping): We all know that the shipping industry hasn't been immune to its fair share of troubles the past year or so. Notably, Hanjin, Toisa, Daewoo, Ezra, and International Shipholding have all seen themselves in bankruptcy court. And, of course, Algeco Scotsman restructured as did Modular Space Corporation, as container companies, naturally, have also felt the effects. So, we thought this use case for surplus modular containers was interesting and we're dying for one of our readers in, say, Texas, to get one of these and report back.
Rewind IV (Apologies...More on the Retail Apocalypse): Last week we highlighted Jeff Jordan's early 2014 call on retail. Subsequently, he dove into the mall scene: you can read it here. The below excerpt should be particularly interesting to PETITION readers as we've been saying for some time that restructuring pros who continue to claim that Bonobos and Warby Parker will fill the retail void are, quite plainly, making a$$es out of themselves. As are, quite notably, REIT CEOs. Nothing has changed since JJ wrote this...
- Grocery. Cerberus Capital Management-owned Albertsons is reportedly in talks regarding a possible take-private buyout of publicly-traded grocer Sprouts Farmers Market ($SFM). Given the tough grocery environment, this is an interesting development. And it may get EVEN MORE interesting given this.
- Oil&Gas. Crude stockpiles hit a modern record this week as American producers basically flick off Saudi Arabia/OPEC and produce, baby, produce. Crude priced down to ~$48/barrel. This - and the embattled state of Seadrill Ltd. - isn't stopping John Fredriksen from looking at picking off offshore assets. Speaking of offshore assets, the oil players are going face-to-face with power suppliers - for wind. Meanwhile, a dissenting view relating to the effect of the rise of electric cars on oil demand (paywall). Elsewhere, in Canada...
- Retail. Bebe Stores Inc. ($BEBE) is plans to shut down its brick-and-mortar locations and become an exclusively e-comm brand - a plan that depends on the sudden charity of landlords who have shown ZERO propensity for flexibility with retail tenants. Seriously, like, ZERO. See, e.g., THE TRAIL OF RETAIL CORPSES LINING THE 2017 BANKRUPTCY ROLLS. Meanwhile, Land's End ($LE) continued to suffer from its association with Sears while reporting a perfect storm of, wait for it...decreased net revenue, decreased catalogue and e-commerce revenue, decreased same-store sales, and worsening gross margin. J.Crew reported sliding sales, revenue and same-store comps but nevertheless reported a (very) small profit - largely on the back of Madewell. And then there is Nike ($NKE) which, in its quarterly report, noted increased profit but modest sales growth in the face of online shipping headwinds.
- Retail II. Uh oh. It appears that Walmart may be getting it's (e-commerce) sh*t together which doesn't bode well for brick-and-mortar already suffering from the Amazon onslaught. Speaking of which, peace out Payless Inc. Wethinks we'll soon be saying "peace out" to a bunch of Chinese shoe manufacturers on top of the thousands of American jobs that will be wiped out. But dividends for Golden Gate Capital and Blum Capital Partners!
- Rewind I: We have taken a little bit of heat for two mentions of 3D-printing in this newsletter; we have been accused of over-hyping the technology and its near-term ramifications. Well, noting the Adidas announcement this week, have we??
- Rewind II: The risk factors listed by Sears are almost comedic. Meanwhile, let the vendor onslaught commence. This is how things might shake out for Lampert. Elsewhere in the epidemic-of-store-closures line-item, GameStop is shutting 150 stores - as we predicted.
- Rewind III: Minimum $500mm DIP loan for Westinghouse? And a cascading effect to the muni bond market? This is beginning to look like all out (nuclear) war...ugh...with Toshiba, Scana Corp. and Southern Co. now all advisored up. Meanwhile, South Korea Power Corp. (Kepco) looks like a potential bidder.
- Chart of the Week:
- 2016 Ranked. Jones Day LLP, the most prolific distributor of bankruptcy-related content, released this highly unscientific ranking of top-10 publicly traded bankruptcy filings. Go big or go home, Jones Day: if you're going to put out a top 10, don't pull the old "if we rank our own deal second, nobody will notice the blatant self-promotion" trick. Go #1 and own it (arguably deserved here, anyway).
- Cross-border. Jay Goffman and Christine Okike of Skadden discuss Hanjin Shipping and Chapter 15.
- Out of Court Restructuring Alternatives. Bankruptcy professionals are really racheting up their tech skills a notch: here, Sam Newman of Gibson Dunn, Jim Baer of CMBG Advisors Inc., Michael Ozawa of Enterprise Management Advisors LLC, Kim Withrow of Bibby Financial Services and Neil Morganbesser and Alex Kasdan of DelMorgan & Co. discuss, by webinar, options like ABCs which our friends in the VC space love to use to keep their failures secret. Shhhhhh.
- Retail. Greenhill & Co.'s Christopher Grubb opines about the state of retail in this Bloomberg video clip. Choice quote about coming retail bankruptcies: "I think there will be 30 or 40 of meaningful scale."
- Capital Markets. The return of the Holdco PIK Toggle bond - a precursor to the inevitable market collapse. Or so they say.
- Coal. Plants are closing. Looks like some votes from coal country were misplaced.
- Dead Malls. Investing. See, e.g., this piece on Macerich. We don't typically cite to Seeking Alpha's collection of vagabonds and yahoos, but we found this particular analysis of A Malls interesting.
- Exploration & Production. 17 months after filing its prepackaged bankruptcy case(s)...or was it prearranged?...sh*t, it's been so long that we can't even remember, Samson Resources Corporation finally has a confirmed plan of reorganization. We'd be curious to see what the professional fees are as a percentage of debt ($5.6b): perhaps this should be a new in-court ratio for courts to consider as part of 327(a) review. At least we got a new term of art out of it: "the Kirkland Prepack". So, there's that (2x if you consider EFH this week, too).
- Nuclear power. Toshiba took a beating on Westinghouse this week. And now there are whispers of bankruptcy.
- Retail. We have a Billions-style therapist in-house who keeps using bad sex metaphors to inspire us to be more positive about retail. Ok, no we don't: last we checked none of you are paying for this newsletter and so how the hell would we afford THAT?! Still, there are some positive signs for retail: Barron's, for instance, thinks Macy's stock has fallen too far and has upside. Meanwhile, specialty women's retailer J.Jill has filed its S-1 under the JOBS Act for an IPO which either means there's one retailer bucking recent trends or - more likely - TowerBrook Capital Partners LP is looking to dump this thing before Amazon gobbles it up like it has everything else. Damn...that was cynical and negative wasn't it? Well, we tried.
- Retail II. This week we learned that Warren Buffett dumped his entire position of Walmart stock ($900mm) which, as this piece notes, ain't exactly a vote of confidence in retail. Perhaps Buffett would have reconsidered had he known about "Moosejaw Madness." You read that right: this week Walmart spent $51mm to purchase Moosejaw, a Michigan-based online retailer (with about a dozen B-and-M locations). Interestingly, the business is similar to Gander Mountain which, as we covered last week, is staring down the barrel of a liquidation. Oh, and hhgregg isn't exactly instilling confidence either (yes, its publicly traded). But, in an ironic twist, Amazon is upping to 8 B-and-M book stores.
- Retail III. This won't help mall foot traffic: frustrated by a lack of options, start-ups like Dia&Co. are looking to tackle the plus-size market (with wholly-unoriginal Birchbox-style monthly mailings). And a fresh round of funding from well-known VC Sequoia Capital will aid the effort. Speaking of Birchbox, note that the business - despite being copied by a slew of other start-ups - isn't exactly a shining tower of success; it recently took on venture debt (and rif'd staff) and now it's exploring pricier options to juice revenues.
- Shipping. A bloodbath in China for the shipbuilders and Hanjin Shipping = toast.
- Uber. With $500 million of delinquent taxi medallion loans, NY state regulators seized the Melrose Credit Union. #disruption
- Wind. No holding it back.
- Fast Forward: The oil and gas restructuring wave appears to be mostly behind us but the offshore operators remain under duress: case and point, Hornbeck Offshore, which may have various issues heading into 2018.
- Rewind I: A "decades-long garage sale" = Sears.
- Rewind II: Scout Media, a post-mortem.
- Rewind III: Canadian Retail. We previously noted the demise of Shoes.com. Here are some additional thoughts on the state of retail north of the border.
- Chart of the Week: