I mean how can it not be a looting?pseudo3d wrote: ↑April 10th, 2024, 8:43 am Again I'm saying that however scummy private equity can be, they do not pull the plug on an entire chain like that unless there is something else at play that isn't well-known.
I don't think you can say "this is just another private equity looting!" when an unprecedented total liquidation is presented.
The facts are clear.
No long term debt, the ten largest parties owed money are waiting for only $35M. Assets valued between $1B and $10B. Typical debt to equity in retail is considered acceptable over 2:1, and this is probably like 0.00001:1 when lease obligations are canceled.
Business has been run into the ground with little effort and poor execution last few years. Universally agreed that poor execution is the primary reason for customers to stop shopping there.
Liquidation will pay the creditors then return all remaining funds to ownership.
Real estate firm hired to dispose of billions of dollars in assets.
They owe a few million and are selling billions in real estate.
Who exactly do you think is going to get that money? Do you think they're going to write a fat check to charity? The Red Cross? Salvation Army? United Way?
No, all the returns on the liquidation will go right to the ownership group because the (tiny) group of creditors will be made whole and there will be ample leftover cash.
What do you think happens to that cash from selling the assets? Do you think the bankruptcy court has a ceremonial burial for it? Do you think they're going to sell the real estate at 90% off, same as the last loads of leftover goods during the last ten days?
How is it not a PE looting when the FACTS as presented so far indicate a MASSIVE Payday coming for the ownership? Have you looked at the facts (inconsequential debt, obvious mismanagement and neglect of the business, no known effort to improve or attempt to salvage or restructure the business, numerous financial options available besides liquidation, massive billion dollar real estate portfolio for sale)?
This is the financial equivalent of being temporarily short on cash so you're selling your entirely paid off house and car so you can pay off this months Netflix subscription, instead of putting it on a credit card.
The ratio of known debt to assets is insanely off. If it wasn't for the legal maneuvers several years ago to move lease obligations to the liabilities side of the balance sheet (a false liability since they are canceled in bankruptcy) it would not be so easy for anyone to claim insolvency whenever they wanted to as no company would maintain the cash or cash equivalents needed to immediately pay off the next few decades of their leases. This is one of the reasons why the commercial real estate holders are in trouble as there is basically no penalty for termination of a lease now. They literally would not have been able to file this bankruptcy a few years ago because they're not actually far enough "in the hole" financially to be considered insolvent without future lease obligations counting like long term debt.
Why is this not obvious? Of course it's a private equity looting. They are walking away from the company with both a pile of cash and the ability to write off the "loss" of their investment. Any sane operator would have taken out appropriate loans against these assets as we apparently were falsely led to believe had already happened, then performed the necessary work to fix the business.
As far as the not-well-known, it's the cloudy outlook for Real Estate. Right NOW is the time if they want to unload these properties for redevelopment as the profits are still incredible for developers to buy these, build and resell condos at top dollar. The truth is starting to leak out, that the developers and state have basically conned everyone into thinking there is a housing shortage to artificially inflate prices, while also removing all the red tape so the developers can run amok and bulldoze everything in sight. The government themselves has already issued the facts, there was a SURPLUS of 3 million residential units in California versus households on the 2020 census. Due to multigenerational housing (multiple households in one residential unit) it is likely the surplus of housing is even larger than straight comparison of households to units. Population has declined since then and millions more units have been built. I would not be surprised if the surplus of housing is approaching 6 to 7 million homes, and the argument that none are affordable is only because the pretend shortage causes the inflated prices. There is going to be a reckoning coming in the next few years when this new bubble bursts. So for the owners of 99 there is no better time than right now to make the largest profit they have had any chance to make in their company history even if it means killing the company. In a few years they might not be able to sell those old stores at any price, but today they can probably get 9 figures a piece for the sites in the Fairfax district and other key parts of LA where a developer can stack 30 stories of multi million dollar condos on them.
They had a choice, fix the business and maybe get $25, $50M a year in profits once all the bills are paid with the risk that the banks get the assets if they can't execute a turnaround. Or make a fast billion or two right now by killing it and disposing of the assets at top dollar. It's obvious that they chose the second option.