💥Sears = Sh*t Show💥

Sears, Iconix Brand Group, Puerto Rico & More

Disruption from the Vantage Point of the Disrupted
Read Time = 16.1 a$$-kicking minutes
Twitter: @petition

🗞News of the Week (6 Reads)🗞

1. The Sears Sh*tShow Picks Up Pace (Long Chances of Liquidation).

Oh man. There’s been a frenzy of activity around Sears Holding Corp. ($SHLD) now that Akin Gump Strauss Hauer & Feld LLP and the UCC have ramped up. Let’s review what took place — most of it on Friday alone.

So, what does the UCC allege? First, in an objection to the Debtors’ proposed global bidding procedures, they highlight (Docket 640) that the Debtors’ proposed process will take three-to-four months at a projected cost of approximately $125mm a month — yup…a MONTH…something that all but assures that a second DIP facility will be needed (secured upon heretofore unencumbered collateral that, as things stand now, could constitute recovery value for unsecured creditors). Second, they underscore that they have seen no business plan that supports that a right-sized Sears can even persist. They write:

…the Go Forward Store “business plan” appears to be nothing more than wishful thinking, as it will require a reduction in the Debtors’ excessive selling, general and administrative expenses by almost two-thirds to return to profitability, a feat the Debtors could not accomplish in the six years leading up to the commencement of their chapter 11 cases.

💥🔥BURN🔥💥

They continue:

Based on the Debtors’ projections, if the Going Concern Sale Process is not successful (and there is no indication that it will be), the value encumbered by the junior DIP facility may be lost. The stark reality is that if the Going Concern Sale Process fails, the costs incurred in connection therewith—coupled with the ABL DIP Facility and additional junior DIP—may leave the Debtors’ estates administratively insolvent. See First Day Declaration ¶ 13 (noting that the Debtors’ liquidity needs “should [be] adequately address[ed]” by the combination of the DIP ABL [F]acility, the Junior DIP and the proceeds of contemplated going out of business sales) (emphasis added).

The UCC/Akin also noted concerns about the mechanics of the global bidding procedures, calling them confusing and unlikely to generate interest from strategic buyers. In doing so, they state:

Confirming the Creditors’ Committee’s concern, only one bidder has emerged publicly for the Go Forward Stores: Edward Lampert’s ESL Investments, Inc…. Now that the Debtors have sought bankruptcy protection, however, they no longer can construct transactions for the benefit of ESL.

💥🔥BURN #2🔥💥

This is a statement that, of course, dovetails nicely into the UCC/Akin’s motion for expedited discovery of ESL/Lampert (Docket 484). Anyway, they want to keep Eddie at bay and, to the extent there is a sale on such an expedited timeline, they want to force him to pay in cash so that he doesn’t credit bid only to have the claim upon which any such credit bid would be possible be nullified after a full investigation by UCC and/or the company’s Sub-Committee of independent directors. Did you get all of that? Riveting stuff, this is.

The UCC has a meeting with the company’s advisors on Monday. We expect to see additional filings on these topics in advance of the November 15 hearing.

*****

Meanwhile, the UCC doesn’t appear all too impressed with the fact that Evercore Group LLC ($EVR) keeps posting gangbusters earnings. In fact, to the contrary, they don’t want to contribute to those earnings. The busy bee UCC objected (Docket 629) on Friday to Evercore’s proposed retention as investment banker to the restructuring sub-committee. The highlighted the $200k monthly fee and a clause in Evercore’s engagement letter that purports to guarantee Evercore a minimum of $3mm and asked: why the hell is all of this needed for if the committee will also pay for the services of Alvarez & Marsal LLC?

💥🔥BURN#3🔥💥

The answer is that the fine folks at Akin need to read PETITION more often: the answer is that, obviously, they want to give the appearance of having a roster of professionals in tow to make the investigation look truly independent and authentic. Duh!! Meanwhile, one might also ask why the UCC needs Houlihan Lokey if they’ve already got FTI Consulting by their side? All of this is a bit ridiculous but it’s good to see at least some attempts by the bankruptcy bar to reign themselves in.

*****

Finally, as if this whole shebang wasn’t enough of a clusterf*ck, you’ve got the added layer of massive amounts of intercompany debt and credit default swaps (“CDS”). While CDS usually imply all kinds of nefarious sh*t in connection with bankruptcies, here they may actually be a positive for Sears. As a source of much-needed liquidity. We’re going to do our best to boil this down to its simplest form.

  • In 2002, debtor entity Sears Roebuck Acceptance Corp. (“SRAC”) issued approximately $2.3b of SRAC Medium Term Notes Series B (“MTNs”), all of which are currently owned by various other Sears debtor entities.

  • SRAC is a “reference entity” under various CDS contracts and the BK was a credit event under those contracts, triggering a settlement amount owed to the holders of CDS protection in an amount equal to the notional amount of the CDS minus the value of the MTNs (the “Loss Percentage”).

  • Stick with us here. We’re trying. We really are.

  • Per Bloomberg, “Brigade Capital Management, Omega Advisors and Och-Ziff Capital Management Group are among fund managers that bought CDS against a Sears default and are awaiting a payout….” Per The Wall Street Journal, Cyrus Capital Partners LP is on the other side of the trade; meaning, it sold the contracts that the aforementioned three funds seek to collect on. Apparently, Cyrus didn’t think Sears would fall into BK as soon as it did. Whoops! 😢

  • The Loss Percentage needs to be determined at an auction conducted by the International Swaps and Derivatives Association. Now this part is a bit confusing but suffice it to say that sellers of credit protection, i.e., Cyrus, are incentivized to bid up the MTNs at the auction so that the difference between the notional amount and “the value of the MTNs” is lesser than it would otherwise be and, consequently, the payout is less. On the flip side, Brigade, Omega and Och-Ziff are incentivized to compete leading up to the auction to find MTNs to tender into the auction because then they can earn more of the payout due and owing to them. Indeed, per Bloomberg, “there’s more CDS wagers to settle than available debt.” This supply/demand dynamic could potentially benefit whichever entity currently holds said MTNs. Again, here, that is Sears. Which presents an awfully compelling sellside opportunity for Sears to Brigade, Omega and Och-Ziff that could provide some critical liquidity to the estate in the midst of the UCC’s ongoing battle with the company/ESL/Eddie Lampert. Indeed, note the chart above: prices for MTNs are already heading north.

  • Wait. “How is all of this even possible,” you ask? Good question. Once upon a time, CDS were purchased as protection against a default and nonpayment of debt that investment managers actually held in their portfolios. Hence the concept of CDS “insurance.” But, Wall Street being Wall Street, people realized that there was demand for — and therefore an ability to make a market in — CDS, even for those who didn’t hold the underlying debt. This is called “naked CDS.” That’s mostly what we’re dealing with here.

  • So, where does this leave us? Well, the auction is currently scheduled for November 14 (man this week is going to suck for anyone working on the Sears matter). Sears needs permission from the bankruptcy court, therefore, to engage in a sale of the MTNs before then. The company appears to have already greased the wheels at ISDA to ensure that the MTNs would constitute obligations eligible to be delivered into the auction. So, that’s good. Likewise, the UCC supports this process as well. Also good.

  • The company has retained Jefferies to act as its broker of the MTNs (earning 2% of the proceeds). So, add Jefferies to the laundry list of professionals in the matter.

May G-d have mercy on the souls of those embroiled in all of this.


2. Aftershocks Appear Post-Sears. Part III.

We’ve previously discussed Hanesbrands Inc. ($HBI) and VF Corp ($VFC). Now, Iconix Brand Group ($ICON) come on down!!

ICON, which runs various brands like Candie's, Bongo, Joe Boxer, Mudd, Mossimo, London Fog, Ocean Pacific, Danskin, Cannon, Royal Velvet, Fieldcrest, Starter, Waverly, Zoo York and Umbro, reported earnings on Friday and immediately blamed Sears’ bankruptcy for its abysmal results. Which, again, begs the question: what the hell were these guys expecting? Were they off hanging out with Cyrus Capital?

The company experienced a 13% YOY revenue decline in Q3 and a 16% YOY decline for the nine months ended September 30, 2018. Across the board, generally, this was a turd. Revenue declined 28% in its women’s segment, 36% in its men’s segment, and 6% in its home segment. In its international segment, however, the company experienced 26% revenue growth on the back of its Umbro and Lee Cooper brands — but that wasn’t enough to offset the horrible performance elsewhere.

The company marked a $8.2mm bad debt expense as a result of the Sears bankruptcy. The company also lowered its full year revenue guidance on account of the Sears BK. Despite all of this positive news:

We are currently in compliance with the financial covenants related to our indebtedness and our current three year projections show us to be in compliance through 2021.

Its capital structure looks like this:

The stock went down 17.7% after-hours (which, to be fair, isn’t hard to do when you’re a penny stock). And, interestingly, there wasn’t a single analyst on the earnings call.


3. The Tax Man Cometh for Bankruptcy Professionals (Long Fees)

We have generally avoided any discussion of the Puerto Rico situation because there are outlets with far more resources dedicated to it than we could possibly lend. But this bit caught our eye:

Puerto Rico lawmakers plan to tax the fees collected by legal and financial experts working on the island’s debt restructuring as the cost of the record-setting bankruptcy hits $228.4 million, the lead lawyer working on the case said in court Nov. 7.

Under the proposal, the commonwealth would collect a 29 percent tax on any fees paid for work not done on the island, said Martin Bienenstock, who represents the federal oversight board leading the debt-reduction effort. Most of the top lawyers and financial advisers in Puerto Rico’s bankruptcy are based in the mainland U.S.

Should the tax become law, most firms would have to increase the fees they charge because they can’t afford to keep doing the work otherwise, Bienenstock said.

“That is a matter of great concern,” U.S. District Judge Laura Taylor Swain said in a San Juan courtroom Nov. 1 . Swain said she hoped that “whatever happens doesn’t inhibit these proceedings.”

At first blush, our reaction was “c’mon…you must be kidding.” But then we took a closer look. The attorneys at Proskauer Rose LLP appear to be servicing this unprecedented and highly complicated mandate at effectively half price: $759/hour. Given that the industry is now as high as $1600/hour (see Sears), this is a relative bargain. Taxing that at a 29% clip demotes the effective hourly rate down to $539/hour which, for better or for worse, is in the realm of junior associates. With the recent self-inflicted cost structure increase across biglaw, Mr. Bienenstock may actually be realistic in saying that such a tax makes the mandate virtually unserviceable. Will they actually back away if this tax gets enacted?

Imagine that: we’re actually (somewhat) defending fees. Must be a full moon out.


4. 🍾Flashback: New Chapter 11 Bankruptcy Filing - Circuit City Stores Inc.🍾

November 10, 2008

Circuit City Stores Inc., a Virginia-based publicly-traded operator of a chain of retail electronics stores, online websites and a telephone product call center filed for bankruptcy in the United States Bankruptcy Court for the Eastern District of Virginia. The company “sells, among other things, televisions, home theatre systems, computers, camcorders, furniture, software, imaging and telecommunications products, and other audio and video electronics.” In other words, basically everything you now have in your pocket in the form of an Iphone (and people wonder whether they can justify paying Apple $1,500). My, things have changed.

At the time of its filing, the company operated approximately 712 superstores and 9 outlet stores, ran two websites (including the now relaunched and rejuvenated circuitcity.com…seriously) and the aforementioned phone-order call center. It employed 39,600 full and part-time employees in their stores and corporate headquarters (not to mention an additional 11,000 part-time workers during the critical holiday season); it also had 1,000 merchandise vendors and 6,500 suppliers. In other words, this sucker was a beast during its day. It had approximately $900mm of funded debt.

For the fiscal year ending February 29, 2008, the company reported revenues of $11.74b and a net operating loss of $319.9mm. Thereafter, in its September 20, 2008 10-Q, the company reported additional losses of $403mm. Per the company’s bankruptcy filings,

The largest driver of declining performance was a double-digit decline in in- store traffic from the previous year.

These numbers would explain why Blockbuster Inc….yes, Blockbuster Inc., balked at acquiring the business in May 2008. Blockbuster performed due diligence and, knowing a dumpster fire when they see one, immediately ran for the hills. Thereafter, with the assistance of Goldman Sachs & Co. ($GS), the company ran an unrequited sell-side process.

With cash seemingly on fire and no potential strategic buyers interested, the company hired Rothschild, FTI Consulting Inc. and Skadden Arps Slate Meagher & Flom LLP to provide restructuring advice and a contingency plan. At this point, the board now featured a vice chairman from large equityholder, Wattles Capital Management LLC, James Marcum, who also served as the company’s CEO starting in September 2008. He was known as a turnaround guy.

With the assistance of its restructuring advisors, Mr. Marcum and the company initiated a three-pronged strategy to stem the tide; it sought to (i) restore its brand and engage in increased efforts to appeal to existing and new customers; (ii) shed unprofitable stores and layoff employees; and (iii) preserve and/or improve vendor relations. Like, seriously. That was the plan. You don’t need 20/20 hindsight to understand that that plan was BASIC AF.

Relating to the first initiative, the company focused on “elevating customer service standards in all stores,” a narrative that should strike a PTSD chord with anyone who followed the Toys R Us sh*tshow. My, things haven’t changed. It also pursued merchandising improvements, advertising and pricing initiatives…blah blah blah. As we said, BASIC AF.

Regarding its footprint, the company hired Hilco Merchant Resources LLC & Gordon Brothers Retail Partners LLC and began pre-petition store closures of 154 stores. Attendant to the store closing drive were layoffs — at least 1,300 employees. In the first instance.

Finally, the company endeavored to engage its vendors in open and honest communications relating to the results of its turnaround efforts.

Notwithstanding all of the above, the company required bankruptcy due to a liquidity crisis arising out of decreased liquidity. Seriously. The company actually said that; it noted:

In large part, a chapter 11 filing is due to three factors, all of which contributed to a liquidity crisis that prevented the Company from completing its turnaround goals outside of formal proceedings: (i) erosion of vendor confidence; (ii) decreased liquidity; and (iii) a global economic crisis.

See. We weren’t kidding.

Further explaining the factors contributing its descent into bankruptcy, the company continued:

Although the Company worked hard to preserve and, in some instances, enhance vendor relations, the Company's efforts did not instill the widespread vendor confidence the Company needed. Many of the Company's merchandise and other vendors altered their relationships with the Company to the Company's detriment. Specifically, various merchandise vendors restricted the Company's available trade credit and reduced payment terms; in some instances, the Company's terms were changed to cash in advance. These two factors alone significantly strained operations because the Company found it more difficult to sustain adequate product inventory and other store supply levels.

Hahahaha. NO SH*T THIS WOULD HAPPEN. Imagine how those discussions played out:

Circuit City: “Uh, hey guys, we’re in the middle of an operational restructuring and, uh, you know from our SEC filings that we’re publicly bleeding $400mm in cash…let’s just keep an open line of communication.”

Vendor: “Wait, seriously? F*ck you, pay me.”

Circuit City: “Haha, good one, guys. But, seriously, we just want to be open and honest with you and maybe you guys will cut us a bit of a break…?”

Vendor: “Um, no. F*ck you, pay me. Like, seriously. Pay me. Like, now. And, p.s., f*ck you.”

Now, if you know anything about how asset-based revolving credit facilities secured by inventory work, this all had the added effect of constraining availability under that facility and squeezing liquidity further.

Good thing the capital markets were open to…oh, wait. This was 2008. The company noted:

Faced with these issues, the Company also found that additional liquidity was not available through traditional channels, such as the credit markets. This was due to the widespread liquidity crisis among all major banks and other lending institutions throughout the country. Accordingly, the Company could not access additional liquidity from third party sources.

Good thing the company was focused on new advertising campaigns, merchandising improvements and the like because…oh, wait. This was 2008. The company noted:

…the Company found itself -- like all other businesses -- entrenched in the worst economic crisis since the Great Depression. As fallouts from the mortgage crisis rippled through the United States economy, the Company witnessed firsthand the significant negative effects. These effects have taken many forms, not the least of which is decreased customer traffic in stores. Simply stated, over the past several months, consumers have been unable to borrow funds through credit cards, let alone home equity loans, to purchase household and other electronics products, which had a drastic effect on sales because 75% of the Company's sales are generated through credit card purchases.

What didn’t the company blame its filing on? Best Buy. Amazon. A relatively poor real estate profile. A failure to secure partnerships with Apple. The cessation of appliance sales. Neglect of gaming. But it certainly could have. After all, Best Buy managed to navigate the Great Recession fairly well.

Due to this perfect storm of events, the company filed for bankruptcy with the intention of (a) securing new credit, (b) continuing its store closures and rejecting additional unnecessary leases, and (c) working with its vendors. We all know how that played out. The company obtained “a bridge to somewhere” DIP loan ($1.1b) but, in the end, the company desperately needed a buyer to survive. But no buyers were forthcoming. Two months later the case converted to chapter 7, all 30+k employees were binned and the company liquidated.

*****

Why do we write these flashbacks? The history is important. Exactly ten years ago one of the biggest bankrupted retailers of the day was a 700-stored specialty retailer with a relatively picayune ~$900mm of funded debt. Even with all of the retrospectives relating to the 10-year anniversary of the financial crisis, there was scant discussion of the effect of the closed credit markets on businesses like Circuit City and Blockbuster Inc.

25k employees lost their jobs at Toys R Us and now Congress is all fired up. This is nothing when compared to the magnitude of Circuit City. But Toys R Us failed in boom times. This made it stick out. Circuit City…well, it was just one of many. And it was public. There were no PE overlords to blame for excessive dividends and the like.

All of which gets us to this question: what happens if the economy turns south?

It could be an absolute and utter bloodbath.


5. Fast Forward

  • The Archdiocese of Agana will be the latest in a line of archdioceses that file for bankruptcy on account of abuse claims.

  • Bluestem Brands Inc. earned itself an S&P downgrade due to its “unsustainable capital structure.”

  • Cloud Peak Energy earned itself an S&P downgrade on grounds that it may breach its maximum leverage covenant within a year.

  • Faraday Future has only enough cash to last into December. #BustedTech?

  • Ferrellgas Partners L.P. earned itself an S&P downgrade this week due to “significant refinancing risk related to $357 million of notes coming due in July 2020.

  • Quorum Health reported YOY declines in revenue (down 8.8%) and a net loss of $53.9mm, a significant YOY jump from $29.2mm last year. The company has been divesting assets and using the proceeds to pay down debt. Additional hospital divestitures or closures are slated for 2019.

  • Sanchez Energy Corp. earned itself an S&P downgrade this week due to an increasing risk of restructuring and an unsustainable balance sheet.

  • Synergy Pharmaceuticals Inc. ($SGYP) appears to be on the brink of bankruptcy as it struggles to comply with the covenants in its term loan with CRG Servicing LLC. The NY-based biopharmaceutical company focuses on the development and commercialization of novel gastrointestinal therapies.


6. Previously on PETITION

Back in February when Tops Holding II Corporation filed for bankruptcy, we wrote:

The company has secured $265mm in DIP financing to fund the cases; it says that it "intend[s] to remain in chapter 11 for approximately six (6) months." We'll believe it when we see it. 

Roughly eight months later — in what amounts to the exact opposite of under-promising and over-delivering — the company confirmed its plan of reorganization late this week.

All jokes aside, though, this looks like a bankruptcy case with a good result and while we were right to call into question the aggressive timing prediction, we were wrong about this case being a “war” with employees/unions. In fact, the company was able to withdraw from its pension funds without extensive litigation. In exchange, it agreed to participate in and make contributions towards 401(k) plans for the benefit of certain of its employees.

Otherwise, the company (i) rationalized its store footprint (by rejecting 12 leases), (ii) renegotiated remaining lease terms in 45 instances (to the tune of approximately $27mm in savings), and (iii) on account of guarantees, got one of its guarantors to subsidize 9 of its leases. It also cut its debt by approximately $445mm, with a net reduction in interest expense by $36mm.

The new capital structure will consist of a $150mm ABL and a $35mm term loan. The holders of $560mm 8% '22 senior secured notes (read: the fulcrum security) will get $100mm in new second lien notes and 100% of the equity in the reorganized company (subject to dilution from a management incentive plan). General unsecured creditors? They’ll get interests in a GUC Litigation Trust as a trustee pursues claims against the company’s prior (private equity) sponsor group.

Grocery has been a tough space of late. Sure, the case extended two months beyond the initial prediction but, again, in the end, it appears that the parties reached a rational consensual compromise that benefits all parties. Kudos to those involved.

*****

Back in April in “👎Nobody Wants a David's Bridal Dress👎,” we wrote:

The Conshohocken Pennyslvania-based retailer is the largest American bridal-store chain, specializing in wedding dresses, prom gowns, and other formal wear. The company has approximately 300 stores nationally (and declining). It also has approximately $1 billion of debt hanging over its balance sheet like an albatross. Upon information and belief (because the company is private), the capital structure includes a $125 million revolving credit facility, an approximately $500 million term loan due October 2019, and $270 million of unsecured notes due October 2020. The notes are trading at roughly half of par value, reflecting distress and a negative outlook on the possibility of full payment. Justifiably so. With EBITDA at roughly $19 million a quarter, the company appears 9.5x+ leveraged. And you thought YOUR wedding dress was expensive.

Why so much debt you ask? Well, c’mon now. Surely you’ve been reading us long enough to know the answer: private equity, of course. The company was taken private in a 2012 leveraged buyout by Clayton, Dubilier & Rice.

So, yes, the clock is ticking and it appears that David’s Bridal will be the next sizable retailer to end up in bankruptcy court. You can blame PE. You can blame millennials. You can blame both. Either way, the question becomes to what degree noteholders Oaktree Capital Management and Solace Capital Partners will play ball. And time is running out: this thing looks like it could go by Thursday, November 15.

Your wedding, powered by private equity.

*****

Speaking of private equity, in “Plus-Size Beauty is a Plus-Size Sh*tfest (Short Apax Partners’ Fashion Sense),” we wrote:

Here’s some free advice to our friends at Apax Partners: hire some millennials. And some women. When you have 23 partners worldwide and only 1 of them is a woman (in Tel Aviv, of all places), it’s no wonder that certain women’s apparel investments are going sideways. Fresh off of the bankruptcies of Answers.com and rue21, another recent leveraged buyout by the private equity firm is looking a bit bloated: NY-based FullBeauty Brands, a plus-size direct-to-consumer e-commerce and catalogue play with a portfolio of six brands (Woman Within, Roamans, Jessica London, Brylane Home, BC Outlet, Swimsuits for All, and Eilos).

Wait. Hold up. Direct-to-consumer? Check. E-commerce? Check. Isn’t that, like, all the rage right now? Yes, unless you’re levered to the hilt and have a relatively scant social media presence. Check and check.

Here are some numbers for you: Apax Partners purchased FullBeauty in August 2015 for $1.5 billion from Charlesbank Capital Partners and Webster Capital (Kirkland & Ellis LLPserved as legal on the deal for Apax, just like it did in the two aforementioned bankruptcies). This was reportedly 3x more than the CCP and WC paid for the company two years prior. A nice premium. And a nice premium requires some nice leverage.

The company’s capital structure, post leveraged buyout, is now as follows: $175 million ABL; $820 million ‘22 first lien term loan (trading in the high 30s); and a $345 million ‘23 second lien term loan (trading in the high teens). Yes, over $1 billion in debt for a web-and-catalog retailer. Clearly nobody expects those loans to be paid at par. Rad.

This week FULLBEAUTY Brands Inc. announced that it entered into forebearance agreements with its asset-based lenders and first lien lenders. What about the second lien term loan holders? Well, they appear to be S.O.L. Likewise, Apax Partners. The company stated:

These efforts have been successful, resulting in an agreement in principle with the Company's key stakeholders on the terms of a consensual transaction that will significantly deleverage its balance sheet and contemplates payment of the Company's trade partners in the ordinary course of business. The Company expects to complete the transaction over the next few months.

Chalk this one up as another retail chapter 11 coming to a bankruptcy court near you.

*****

In “🍟Casual Dining is a Hot Mess. Part IV (Short Kona Grill)($KONA)🍟,” well…the title is pretty self-explanatory. We noted all kinds of issues with KONA and concluded, “this situation merits continued watching.

On Thursday the company reported earnings and noted same-store sales declines of 14.1%. YIKESEES. It shut down two restaurants (leaving it with 44) and appears hotly focused on operational initiatives to drive down the cost of doing business. It needs to be. Let’s keep watching.


Want to tell us we're morons? Or praise us? Cool, either way: email us at petition@petition11.com


📉Chart of the Week📈


💼Pros Say💼

Artificial Intelligence. Rodney Brooks, emeritus professor of robotics at MIT, discusses the future of robots and AI (audio). Meanwhile, Andrew Ng, co-founder of Coursera, casts some shade on the timing of AI’s effects on society.

Electric Vehicles. Elon Musk speaks with Recode’s Kara Swisher about tweeting, electric cars, and states that Ford Motor Company ($F) may go bankrupt in the next cycle.

Political Risk. Henry Paulson says he’s never seen “the public and private sectors buffeted by so much risk.

Vote Buying. James Millar of Drinker Biddle examines the Peabody situation and whether “an RSA with Plum Exit Financing” constitutes vote buying.


🗓Events🗓

AIRA 17th Annual Advanced Restructuring & POR Conference, 11/12, NYC

TMA’s 16th Annual Holiday Cocktail Reception, 11/13, NYC

Bankrupt Talent, 11/14, NYC

Guggenheim Restructuring Fall Party, 11/14, NYC

UT Law’s 37th Annual Jay L. Westbrook Bankruptcy Conference, 11/15, Austin TX


⛓Notable: What We're Reading (8 Reads)⛓

1. China (Long Global Opportunity). Oaktree Capital Group LLC and Bain Capital Credit are increasing their distressed debt activity in China.

2. Co-working (Long Freelancers). Beauty may be the next category to go the way of co-working.

3. Europe (Long Global Opportunity. Part II). Marathon Asset Management has a hard-Brexit as their base case and their laying in wait for distressed companies affected by the UK’s disassociation with the EU.

4. General Electric ($GE)(Short Jeffrey Immelt). JPMorgan analyst, Stephen Tusa, reiterated an Underweight rating and cut his price target on the stock from $10 to $6/share. He highlights a significant cash burn, debt, pension issues and liquidity.

5. Peloton (Long Fitness Disruption). The company reportedly doubled subscriptions this past year.

6. Robots and Pizza (Long Delivery). Have you ever heard of Zume?

7. Teens (Long Chick-Fil-A and Netflix). Piper Jaffray released its 36th semi-annual “Taking Stock With Teens Survey” and once-bankrupt PacSun appears to be making a comeback.

8. Wind and Solar (Short #MAGA!). Wind and solar generation costs are on the decline. Watchout coal.


📤Notice📤

Jennifer Meyerowitz (Managing Director) has joined Summit Investment Management LLC from Garden City Group (may it R.I.P.).

🙌Congratulations to:🙌

Earl Hunt of Goldman Sachs on his promotion to Partner.

The bankers at Cowen and Company ($COWN) and Intrepid Partners LLC on the announcement of their strategic alliance.


📚Resources📚

We have compiled a list of a$$-kicking resources on the topics of restructuring, tech, finance, investing, and disruption. 💥You can find it here💥.

Meanwhile, Guggenheim Securities’ Jim Millstein recently spoke with Barry Ritholtzof Ritholtz Asset Management (audio) about the financial crisis, a coming wave of bankruptcies on the horizon, sovereign and municipal debt (where he says there’ll be a reckoning thanks in large part to pensions…right, pensions) and more. Therein, he recommended several books: “Can Capitalism Survive?,” “Crashed: How a Decade of Financial Crises Changed the World,” Capitalizing on Crisis: The Political Origins of the Rise of Finance,” and “Sapiens: A Brief History of Humankind” (which really appears to be one of the ‘it’ books of the moment). With the holidays coming up, all of the resources included on our list would make a great gift for the finance/law geek close to you.


💰New Opportunities💰

Carl Marks Advisors, a nationally recognized investment bank providing operational and financial advisory services, seeks professionals with 4+ years of transferable restructuring and turnaround and experience.  These individuals will work in an integrated team environment on a diverse range of engagements in restructuring, turnaround, bankruptcy, valuation analysis and financial performance assessments. Key attributes include strong accounting & financial modeling skills, independent judgment, resourcefulness, and creativity. NYC based position with substantial travel. Interested candidates should click here https://carlmarksadvisors.com/jobs/ to submit their CV and cover note.

Evercore (EVR) is a leading global independent investment banking advisory firm. Evercore advises a diverse set of investment banking clients on a wide range of transactions and issues and provides institutional investors with high quality equity research, sales and trading execution that is free of the conflicts created by proprietary activities. Evercore seeks to hire the following for its NY office:

  • Associate with relevant experience. For requirements and other specifications, please click here.

  • Analyst with relevant experience. For requirements and other specifications, please click here.

If your firm has job opportunities, please email us at petition@petition11.com.


Nothing in this email is intended to serve as financial or legal advice. Do your own research, you lazy rascals.