Mall Madness! Sears Declares Bankruptcy, Neiman Marcus, Digicel, David’s, Blackboard And Others On Distressed Watch

As expected, Sears has declared bankruptcy!

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There was a time when Sears sold houses, rifles, electric belts, autos and groovy (Eleri) pants in their catalogs. But alas, those times are gone. There is only so long that a company can survive of negatve EPS.

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Forty-four CMBS have exposure to 30 Sears properties that are closing as part of its Chapter 11 bankruptcy filing, according to a Morgan Stanley. That is $2.3 BILLION of exposure to Sears.

  • CMBS has exposure to six K-Marts and 24 Sears, Morgan Stanley analyst Richard Hill wrote in a client note. Seven of the Sears properties are owned by Seritage
  • Two SASB deals have 100% exposure: BBCMS 2015-VFM (a loan for Vintage Faire Mall in Modesto, California), and WTOWN 2017-KNOX (a loan for West Town Mall in Knoxville, Tennessee)
    • Seven deals have 10%+ exposure, according to Morgan Stanley
    • CMBX.10 has exposure to three properties across six deals with $336m of debt
    • CMBX.6 has exposure to five properties across four deals with a balance of $302m

But Sears is not alone.  These companies are on Bloomberg’s distressed list.

  • Neiman Marcus
    • Oct. 15: Interest due on 2021 senior unsecured notes
    • Oct. 31: Payment due on 1L term loan
    • NOTE: Co. said to discuss debt overhaul with creditors; lender Marble Ridge asserts potential default on MyTheresa transfer; co. appoints new CEO amid restructuring talks with creditors; owned by Ares Management and Canada Pension Plan Investment Board
  • Digicel
    • Oct. 15: Interest due on 2021 senior unsecured notes
    • Oct. 19: Deadline for debt swap
    • NOTE: Ad hoc group bondholders sign lock-up agreement; bondholders said to hire Moelis to improve debt deal; co. offers to swap 2020 and 2022 notes for new cash-and-PIK securities and extend maturities, seeks to eliminate covenants and events of default; Bloomberg reports bondholders organize
  • David’s Bridal
    • Oct. 15: Coupon payment due on 2020 notes
    • Co. working with Oaktree Capital and Evercore on reworking debt as creditors hire advisers; controlled by Clayton, Dubilier & Rice
  • Blackboard
    • Oct. 15: Interest due on 2021 2L notes
    • Nov. 15: Interest due on 2019 senior unsecured notes
    • NOTE: Price of debt falls as colleges switch to other systems; S&P changes outlook to negative, citing “tightening covenant headroom” that leaves “little room for error” in managing liquidity
  • Windstream Holdings
    • Oct. 15: Interest due on 2020 senior unsecured notes
    • Nov. 8: 3Q earnings call pre-market
    • NOTE: Court decision pending after Aurelius claims spinoff of Uniti Group amounts to a default; co. refinances bonds, extends maturities, focuses on pushing out maturities on revolver and TL, per CFO
  • Intelsat
    • Oct. 15: Interest due on 2020 unsecured notes
    • Nov. 15: Interest due on 2024 senior unsecured notes
    • NOTE: Co. announces plan to sell 2024 notes to finance repurchase or redemption of 2021 bonds; co. buys back $1.72b of 2020 senior notes; Moody’s and S&P say capital structure is still unsustainable; Cowen says balance sheet has been repaired
  • Ultra Petroleum
    • Oct. 15: Payment due on 2022 senior unsecured notes
    • NOTE: Co. unable to reach pact with lenders, may need to request another break on loan covenants, Bloomberg reports; S&P downgrades on expectation leverage will exceed estimates
  • Uniti Group
    • Oct. 15: Interest due on 1L April 2023 notes
    • NOTE: Bonds fall to record lows as noteholders await Windstream verdict; Moody’s downgrades in June on potential failure to meet debt obligations; S&P affirms B- rating on expectation that Windstream will continue to make rental payments on lease agreement
  • Acosta
    • Oct. 30: Payment due on 1L senior secured term loan
    • NOTE: Bonds fall after co. says customers cut spending; bondholders organize with Davis Polk and seek financial advisers; Moody’s cutsto Caa2 in April on increased likelihood of distressed exchange, calls capital structure unsustainable; co. reports 20% drop in Q1 Ebitda, names new CEO; owned by Carlyle Group
  • QGOG Constellation
    • Oct. 31: New maturity date on $150m credit line after extension and on project financing loans after extension
    • NOTE: Co. hires Evercore to advise on debt talks, Bloomberg reports; S&P downgrades in May after co. says it won’t make interest payments
  • Fresh Market
    • Nov. 1: Interest due on 1L notes
    • NOTE: Moody’s downgrades to Caa2 in July on possibility of distressed exchange within 12 months; notes rally as same-store sales improve; controlled by Apollo Global Management
  • California Resources
    • Nov. 1: Conference call on 3Q results
    • Nov. 15: Interest due on 2024 senior unsecured notes
    • NOTE: Co. amends credit agreement so it can repurchase debt below par and use permitted refinancing indebtedness to refinance
  • Community Health Systems
    • Nov. 15: Interest due on 2019 senior unsecured notes
    • NOTE: Moody’s downgrades, says $262m DOJ payment weakens liquidity; co. “dangerously close” to breaching covenant, but it’s likely to be waived, per BI; co. offers $1b new senior notes to pay down term loans; co. said to hire restructuring advisers, continues selling assets with proceeds likely to pay down term loan
  • Bellatrix
    • Nov. 15: Interest due on 2020 senior unsecured notes
    • NOTE: Co. completes swap that cuts debt by $10.5m and sets stage for more 2020 exchanges; revolving credit facilities extended; co. in discussions with potential new lenders
  • PetSmart
    • Dec. 1: Interest due on 1L notes
    • NOTE: Term loan holders sue, claiming credit agreements breached by Chewy asset transfer; co. denies wrongdoing; Wilmington Trust says transfer must be reversed and a default declared; lenders organize and enlist restructuring advisers

Here are some of the pages from old Sears catalogs.

1973fall-plaidpants

1909fall-motorbuggy

plain-dealer-newspaper-1031-1926-sears-ad-homes

1950fall-rifles

Maybe for my ailing back!

heidelbergelectricbelt

Why is there an electric wire attached to “The Netherlands”? Or as Ron Swanson called it, “The Nuggets”?

Just in case you thought malls were paranoid about Amazon and changing shopping preferences.

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Are Treasury Yields Rising TOO Fast? MOVE And Tyvix Spike (Do The Fed Tighten Up?)

Bridgewater Founder Ray Dalio said back in January 2018 that “A 1 percent rise in bond yields will produce the largest bear market in bonds that we have seen since 1980 to 1981.” 

Well, we are still in a higher bond duration section of the Price/Yield curve where further increases in yield shifts can clobber Treasury prices.

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Like the recent decline in 10-year Treasury Note prices.

fedtighten

Given that the US economy is exposed to an all-time high in interest rate senstivity, it would behoove The Fed to “take it easy.”

OFR duration

Merrill Lynch’s Option Volatiltiy Estimate (a yield curve weighted index of the normalized implied volatility on 1-month Treasury options which are weighted on the 2, 5, 10, and 30 year contracts) and the TYVIX 10-year volality index both spiked recently.

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So let’s see how far The Fed will keep on pushin’, perhaps too hard on equities.

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But fixed-income (bond) funds have been getting beaten since Yellen announced the end of QE in 2014, the beginning of “The Tighten Up.”

januspimcofunds

Yes, Jay Powell & the Drecks from Washington DC are doing the “tighten up.” But should they slow down?

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Darth Malled! JC Penney Is Now A Penny Stock (Almost) – Another Mall Retailer Bezos’d!

Mall retail anchor JC Penney is yet another victim of the on-line shopping revolution.  Note that JC Penney lost 50% of their stock price between early 2007 and the beginning of The Great Recession. It has gone from over $80 per share in early 2007 to under $2 per share today.

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And their corporate bonds, once at par in 2010, have swooned to $44.625 today.

jcpenneybondswoon

Of course, JC Penney has had relatively attroicious earnings per share growth, in part due to on-line sales from competitors and changing consumer tastes.

jcpearn

Yes, American retail shopping malls are getting Bezos’d. Or Darth Malled.

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