99 CENT ONLY closing

[ClownLoach]

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.

I mean how can it not be a looting?
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.

[Bagels]

ClownLatch,
There's a really good write up in today's LA Times about the fall of 99 Cents Only.
* the company's assets are fully leveraged;
* losses & cash burn rate are accelerating;
* it has desperately sought out a buyer(s) and/ or new investors for quite awhile;
* it has looming financial obligations was unsuccessful in restructuring payments;
* it has been behind on rent & vendor payments - some landlords have filed for eviction, some major vendors will no longer sell to the 99 and other vendors require payment upfront.
* after the company was forced to raise prices last year, consumers revolted and foot traffic (and thus sales) plummeted.

The private equity firmed that acquired 99 poured massive amounts of money into the chain, even doubling its size. No doubt they will take a pretty sizeable loss on their investment. But they definitely tried saving the company -- they didn't force it into bankruptcy to sell of its assets (a la Mervyn's).

[storewanderer]

I was definitely seeing maintenance issues on the locations in my immediate area. Inventory issues were due to a lack of labor to stock the shelves. This is not unusual with the dollar chains in my immediate area.

I expect to see a block of these leases on "smaller" sized locations sold to Dollar General and converted to DG Market since that format is apparently still a thing (despite how it looks to be running on fumes in rural NorCal).

But the stores in CA- clean and maintained... FULLY stocked. Friendly employees.

One remodeled store I went to in Las Vegas also was very clean and maintained. On par with their CA operation.

What I saw in TX/AZ, dirty, indifferent at best staff, not stocked as well... just like how they ran Reno.

[ClownLoach]

I was definitely seeing maintenance issues on the locations in my immediate area. Inventory issues were due to a lack of labor to stock the shelves. This is not unusual with the dollar chains in my immediate area.

I expect to see a block of these leases on "smaller" sized locations sold to Dollar General and converted to DG Market since that format is apparently still a thing (despite how it looks to be running on fumes in rural NorCal).

But the stores in CA- clean and maintained... FULLY stocked. Friendly employees.

One remodeled store I went to in Las Vegas also was very clean and maintained. On par with their CA operation.

What I saw in TX/AZ, dirty, indifferent at best staff, not stocked as well... just like how they ran Reno.

I went to fact check the conflicting reports - that 99 had sold/leveraged all assets, and the other report that they have over 40 sites for sale.

Hilco Global Real Estate is indeed marketing 44 sites for sale, as well as 333 of the leases which are described as "strategically positioned." That typically translates to "priced below market." Unfortunately Hilco wants you to register with them before they'll release the details.

I really wish they would set up a bankruptcy site like Rite Aid did because there are definitely discrepancies between different reports, something you don't normally see with a bankruptcy.

So either 44 stores in prime locations are owned and being sold by the company for cash, or Hilco has a fake website they set up listing them as assets they're managing the disposal of. I'm sorry that there is a narrative being peddled that everything was leveraged, secured, leased back etc. but the presence of the assets for sale is evidence to the contrary. Normally a bankruptcy shines a spotlight on the company immediately and creates transparency so these situations where one group is seeing one set of facts, while another is seeing "alternative facts." We are already far along enough that "alternate facts" should have been cleaned up and resolved.

Although I appreciate the existence of all these stories and narratives of a broke company that is believed to have "tried" to save itself, the facts as presented still paint a bad picture. Hopefully the spotlight starts shining and we can start to see court filings and such directly to end the questionable changes.

[storewanderer]

Docket is here
https://cases.ra.kroll.com/99only/Home-DocketInfo

The key will be how much do they get on the real estate proceeds... on any properties they sell etc.

I haven't followed this case much on there.

Looking at Docket 1:

The largest person they owe money to is EMCOR Group, who is owed $7 million. This appears to be a maintenance company.

Canadian Pension Plan Investment Fund seems to own 18% of the company. So a non-controlling interest.

[ClownLoach]

Docket is here
https://cases.ra.kroll.com/99only/Home-DocketInfo

The key will be how much do they get on the real estate proceeds... on any properties they sell etc.

I haven't followed this case much on there.

Looking at Docket 1:

The largest person they owe money to is EMCOR Group, who is owed $7 million. This appears to be a maintenance company.

Canadian Pension Plan Investment Fund seems to own 18% of the company. So a non-controlling interest.

To end the debate about owned, unsold and unleveraged sites, here's the list of properties that Hilco will be selling for them. Looking for more Financials although there is a court order specifically stating that many of the reports we saw with Rite Aid such as sales and P&Ls will be made available for the "courts eyes only" which means we may not get much transparency. It doesn't seem like anyone is fighting them on these requests, further indicators that there aren't any major debts due. The contract for the liquidators seems to expect a very high return as well. Appears they're going to let Gordon Brothers fill the stores up with their own goods too, a 5% commission paid to 99.

[storewanderer]

Sparks 99 Only was told their last day will be April 28. They had previously been told June 3.

There is still a LOT of product in the backroom at this store. They are not making much effort to get it out onto the sales floor. I am wondering if they will just pick it up and sell it in SoCal.

It appears they threw all of their produce away as there is no way they sold it all at 5% off and they were still putting new produce out Sunday when I was there. There is no produce. They really need to clean this place. I didn't like what I saw scurrying between shelves/going under shelves on one of the aisles.

Reno 99 Only also has a LOT of inventory in its backroom. Carson City 99 Only has little on the sales floor and the backroom is almost empty. Not sure if these two had their closing date moved up. They are both no longer adhering to the store hours of 9-9 and seem to close whenever they feel like it more than an hour early. I will be curious to find out if these two got their closing date made sooner too.

[ClownLoach]

Sparks 99 Only was told their last day will be April 28. They had previously been told June 3.

There is still a LOT of product in the backroom at this store. They are not making much effort to get it out onto the sales floor. I am wondering if they will just pick it up and sell it in SoCal.

It appears they threw all of their produce away as there is no way they sold it all at 5% off and they were still putting new produce out Sunday when I was there. There is no produce. They really need to clean this place. I didn't like what I saw scurrying between shelves/going under shelves on one of the aisles.

Reno 99 Only also has a LOT of inventory in its backroom. Carson City 99 Only has little on the sales floor and the backroom is almost empty. Not sure if these two had their closing date moved up. They are both no longer adhering to the store hours of 9-9 and seem to close whenever they feel like it more than an hour early. I will be curious to find out if these two got their closing date made sooner too.

OC Register reports $1.6B in Long term debt, yet the bankruptcy doesn't list it in top creditors. Making me think the debt is to the PE owners which means all the returns go to them, and they hadn't defaulted on that debt. Still very odd that there are discrepancies. The property list is a mix, some properties are probably very valuable others less so.

[storewanderer]

Was told Reno and Carson City are also closing April 28. They expect the discount to be increased rapidly but don't know when. The employees are very upset; they were told a few days ago they'd be working until June 3... and now this. Also these two stores have officially changed store hours to close at 8 PM instead of 9 PM, not clear where that directive came from or who authorized it.

[storewanderer]

So the backrooms are STUFFED FULL in both Reno and Sparks. The stores are closing on or BY April 28 (some employees think they could be closed any second). So I asked what is happening to the stuff in the backroom. I was told they are going to pick it all up and nothing more is going to be stocked. No clue where it is going. The stores are pretty empty.

I've never heard of a total liquidation having the company "picking up" an entire backroom worth of product. These backrooms are a huge mess. There are partially opened boxes, seasonal stuff that never got put out, etc.

I am wondering if that Pic N Save has had talks to take on some inventory so they can quickly turn around and reopen some stores...

These stores were supplied by distribution in Commerce, CA which is almost 500 miles away... assuming that is where the stuff is being taken back to...