Notable (Amazon, 3D-Printing, International Distress, Nordstrom, Taxis)

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Amazon. Losing a user experience advantage. 

3-D Printing. Remember when we said that it could be a game changer and put a lot of companies out of business? Well, adoption is growing so draw your own conclusions (firewall).

International Distress. Looks like Aurelius Capital Management has a fight on its hands in the case of Oi SA. 

Nordstrom. A take private transaction is nearing.

Taxis. There may not be a more painful user experience than the NYC taxi ride. Cramped old sticky leather seats, the distinct smell of 12-hour old vomit, a loud talkative driver who can't use or doesn't use GPS, that annoying TV Talk nonsense blabbering on and on, and air conditioning that inexplicably seems to spit out heat. But, you still have to feel for these guys, the poster-children for disruption. And now the vultures are circling looking to take advantage of desperation.

Notable (Dodd-Frank, 3D-Printing, Post-Reorg Equity, etc.)

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3D Printing. Increasing evidence of its rise from the CEO of Jabil Circuit Inc. ($JBL) - and not just for prototyping. If this continues to grow, it will have wind-ranging implications for manufacturing.

Alitalia. Apparently it's getting a lot of interest.

Credit Cards. Chargeoffs are on the rise. This helps explain, to some degree, why consumer spending is coming in below expectations.

Dodd-Frank. Peace out. We would love some investigative reporter to do a story on the hundreds of millions of dollars that were proffered to big law firms to draft "living wills" that nobody...like not one person...ever thought were based in reality to begin with. That said, not to get political but haven't we seen this deregulation movie before? 

Post-Reorg equity. Brookfield Asset Management has a hedge fund ($300mm seeded, unclear of size now) that is chomping at the bit for post-reorg equity. We're curious to know which ones they think are attractive as several have flat-lined without having a large institutional sponsor underlying the stock. Peabody Energy($BTU), Midstates Petroleum ($MPO), Basic Energy ($BAS), Goodrich Petroleum Corporation ($GDP) and Sandridge Energy Inc ($SD) come to mind.

Radio Shack. Interested in some esoteric home furnishings? Well, interestingly, the carcass of Radio Shack remains up for auction and you can get a piece of it for your crib.

Simon Property Group ($SPG). We've beat these guys up ad nauseum because we don't buy the BS they're feeding us about how healthy they are - despite the noted new "click-to-brick" folks above and the opportunity that may present. This is a reason why. And we expect to see more of this.

Notable (3D Printing, Elliott Management, Sycamore Capital Partners, etc.)

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3D Printing. We've previously noted the potential game changing effect of advancements in 3D printing technology. This view - from the bloggers at UPS - is a little more tempered but interesting nonetheless.

Brookfield Asset Management. Interesting.

Energy M&A. Reportedly, Vistra Energy Corp. is making moves to take over Dynegy Inc.

Gearing for Battle. Elliott Management is hiring to prepare for a restructuring wave (firewall).

Short Coke & Pepsi (read: Bottled Water). On one hand, the volume of plastic water bottles is absurd and harmful to the environment...we get that. On the other hand, however, do we really need a BtoB subscription service for...wait for it...NYC tap water?!? We're split as to whether this is "notable" for its earnest save-the-environment vibe or for its "is this really a frikken problem in need of solving" vibe. We're leaning towards the latter.

Smoking-More-Crack.live. A nice little ranty blogpost from a petulant Eddie Lampert.

Sun Capital Partners & Sycamore Partners. The firm is looking to sell British bedding retailer Dreams - which it acquired out of administration back in 2013 - with Chinese companies in the mix to bid. Rothschild is the investment banker. Meanwhile, to avoid seeing another portfolio company in bankruptcy court, the firm has agreed to, in the event of a rights offering, recapitalize Vince Holding Corp. ($VNCE) with $30mm. Meanwhile, this was an interesting piece on Sycamore Partners and its potentially evolving strategy (though it neglected to acknowledge how dire Nine West is beginning to look).

Trickle Down Economics. Bullsh*t.

Interesting Restructuring News

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  • Financial Services. Ocwen Financial Corp. got pummeled this week with fresh allegations.
  • Pharma/Hedge Fund Hotels. We enjoyed this summary of Bill Ackman's involvement in Valeant. And this piece discussing Marc Cohodes' short-strategy vis-a-vis Concordia International.
  • Fast Forward. With Agent Provocateur (amusing write-up below, if we do say so ourselves) going bankrupt and L Brands (Victoria's Secret) reporting dogsh*t numbers last quarter, we figured we'd look at the lingerie space for a hot second and we found a lot of action. And it ain't good for the incumbents. It'll be interesting to see if Aerie's omnichannel strategy pays off - bold move to double down on physical stores these days - when Amazon looms right around the corner.
  • Rewind I: Groupon. As we foreshadowed might happen, Groupon dropped this bomb on Good Friday while markets were closed - a banal and cynical PR trick to try and avoid a bad news cycle. 
  • Rewind II: Sun Capital Partners. We have been beating up on Sun Capital Partners as its retail portfolio just gets uglier and uglier (see now Marsh Supermarkets, which has apparently hired Hilco to explore strategic options, and Vince, which got itself a recent downgrade). Perhaps CVC Capital Partners and Leonard Green & Partners have gotten the memo; the two PE firms appear to be exploring a sale of BJ's Wholesale Club which, in turn, probably means that any plans of an IPO are on hold. 

Interesting Restructuring News

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  • Busted Tech. Ok, not yet. But soon. Faraday Future has cancelled its plans to build a Vallejo California assembly factory - shortly after scaling back its original Nevada facility. This Techcrunch piece says that "it's unclear where the future will lead for Faraday." Seems pretty clear to us that it will lead to bankruptcy court. And, quietly, a number of (once) high-flying startups are laying people off including, notably, Postmates and Zozi ($60mm VC - Richard Branson and others). Finally, Munchery, often hailed as a top food-delivery startup, required a recap this week to survive.
  • Grocery & Sun Capital Partners. We SWEAR we are not picking on SCP here but c'mon already: now it looks like Marsh Supermarkets is in trouble as the company falls behind on rent and quietly - well, not so quietly anymore - shuts locations. So, let's recap: in the past 6 months, SCP has seen the following portfolio companies file for bankruptcy: Garden Fresh Restaurant Intermediate Holdings LLC, Limited Stores Company LLC, Gordman Stores Inc. Maybe this will be the next?
  • High Yield. Remember a few years ago when Chobani was distressed? Now you can get in on a new offering at a premium to par, it seems. Semi-related, the bidding to lend to Westinghouse in bankruptcy was reportedly pretty intense, with Apollo Investment Corporation duking it out with Goldman Sachs, Highbridge Capital, and Silver Point Finance for the privilege to finance the nuclear power company while it figures out how to restructure its business and address two incomplete installations in Georgia in South Carolina. Yield, baby, yield. 
  • Oil&Gas. That was fast. Like super fast. Seems the new owners of Samson Resources II, LLC don't share a very "long" view of the oil and gas space - despite "having discharged approximately $4 billion of debt and nearly $300 million of annual interest expense from Samson Resources Corporation," aka the previously bankrupt entity that filed in mid-2015. And distressed investors wonder where the term "vulture" comes from. PJT Partners LP was the previous banker for the company but with the Board being what it is, there's no surprise Houlihan Lokey has a piece of the action.
  • Retail. Finish Line added itself to the long line of retailers that reported dogsh*t numbers with earnings down, same store sales down, blah blah blah. Right, and approximately 40 store closures. Naturally. Also, David's Bridal was downgraded this week. The CD&R LLC owned retailer has a $520mm term loan due in 2019 and if millennials continue to flick off conventional marriage, there's no way they'll be able to sell enough gaudy wedding dresses to manage the interest expense. And, uh oh, now there appears to be a glaring hole in the "fast fashion" narrative as H&M missed expectations with declining net profit.
  • Rewind I: 3-D Printing. Not to be a broken record about this, but it is totally real. Last week we noted Adidas' plans for it and this week Under Armour followed suit. The implications for those in the supply chain can't be underestimated.
  • Rewind II: Glass Half Full. Looks like Gordmans Stores won't be a complete liquidation after all: Stage Stores stepped up and, as part of a joint venture with Tiger Capital Group and Great American Group, will acquire roughly 50 stores with an option for a handful of others. The remainder will be liquidated but this presumably means that, for now, a couple of dozen will continue to operate. At least until the inevitable Chapter 22 that occurs after next holiday season. Kidding! (Or are we?)
  • Chart of the Week: 

Interesting Restructuring News

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  • 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?? 
  • Chart of the Week: 

Interesting Restructuring News

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  • 3-D Printing. A few weeks ago we noted the disruptive potential of 3-D printing. You can revisit that piece here. The spare parts market already appears to be under seige.
  • Automation. We hate to pick on support staff as there's been a lot of pain there the past decade but...short administrative assistants? On the flip side, note this.
  • European Distressed Debt. The vultures are looking at Spain and Italy. Meanwhile, last week Agent Provocateur, this week Jones Bootmaker = the latest PE-backed European retailer staring down the brink of administration(with KPMG hired to find a buyer).
  • Grocery. Food deflation appears to be leveling off - good news for grocers who had a rough 2016 (which we covered previously here).
  • Guns. Looks like the rise in anti-Semitism and hate crimes hasn't translated into robust gun sales: Remington Arms Co. is downsizing. The $2.6mm trade claim the company has in the Gander Mountain Company bankruptcy won't help matters either.
  • Malls. The Providence Arcade is deploying new and creative ways to put mall space to use. This brings a whole new meaning to "consumer culture." Meanwhile, more on malls becoming the new big short.
  • Restaurants. Ruby Tuesday is now for sale after closing 100 locations. UBS is apparently the financial advisor.
  • Retail. Shocker! A newly released report delineating the most valuable retail brands failed to include Charming Charlie's, Payless Shoes, rue21, J.Crew...ah, you get the point. Also notably absent from this list is Neiman Marcus which, given its lack of scale (42 stores, ex-Last Call & Bergdorf Goodman), isn't all too surprising on a relative basis but that hasn't stopped it from attracting attention from Hudson's Bay Co (note: the Canadians have been taking a lot of interest in US retail lately, see, also Eastern Outfitters). Looks like some teens DO shop at Neiman Marcus but find malls, generally, "vanilla"...choice quote here: "I like finding stuff on eBay - clothes and accessories that no one else is wearing...[e]verything you can't find in a mall." See, also, Poshmark. Meanwhile, private equity backed retail is especially sordid.
  • Retail II. Bon Ton Stores (BONT) reported higher earnings, cost savings that bested projections and a free cash flow positive '16 (compared to a wildly cash flow negative '15). But same store sales were down big. A few takeaways: 1) bad retail performance is always partially the weather's fault; 2) it's planning to make its landlords sweat with lease negotiations; 3) it's closing 46 stores in '17; 4) it's picking from the carcass of closed Macy's locations, poaching vendors and sales associates; and 5) it's still over-levered AF. While there is no near-term maturity post-retirement of the '17 second lien senior secured notes and the company claims liquidity through '17, the company is still levered at 8.5x and raising rates, generally, won't help retail. And the stock trades in dogsh*t (reverse split?) territory at $1.00. Hmmmmm.
  • Fast Forward: iHeartMedia launched an optimistic restructuring process seeking to swap more than 90% of its $20b of debt; Gymboree got a going-concern warning in the face of declining revenue and same-store sales and a 12/17 maturity; Gulfmark Offshore skipped its interest payment triggering a 30-day grace period due 4/15; the same date marks the forbearance expiration agreed to by lenders of 21st Century Oncology; and Concordia International Corp. reported HORRIBLE numbers and declined to provide go-forward guidance given the headwinds confronting drug pricers. 
  • Rewind I: We swear we're not picking on Sun Capital Partners but this week S&P Global Ratings downgraded Vince Intermediate Holdings to CCC+ making SCP's portfolio a virtual retail minefield. 
  • Rewind II: Yawn, more Westinghouse. 
  • Rewind III: Last week we covered Aquion Energy in our summaries of cases (click company name for summary). Turns out, this dog is more controversial than we thought as its another example of government subsidy gone wrong. Which is not to say we're not for experimentation/funding with/for alternative energy businesses, particularly in storage. But the comments to this seem on point.
  • Chart of the Week: 

Chart of the Week II: