News for the Week of 2/26/17

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  • Busted Startups. Here, Beepi. Despite $150mm of VC and a last raise at a $564 valuation, the used-car marketplace is selling for parts, with Sherwood Partners acting as assignee. With auto-lending for new cars at subprime levels, this capitulation isn't all-too surprising.
  • Busted Startups II. Some argue that part of the failing brick-and-mortar narrative relates to delivery services like Birchbox. Maybe not. Trunk Club sold to Nordstrom and has languished and now JackThreads looks like it's worth JackSh*t. 
  • Clean Energy. Challenges. But progress with storage.
  • Disruption. The fall of Blackberry.
  • Distressed Investing. In malls. These guys have cajones.
  • Greece. Remember the bailout controversies that sent the markets into a tizzy a few years back? Yeah, they're back. Europe looks staged for a lot of volatility in coming months with elections looming in France and Germany. This could create some real interesting investment opportunities. Of course, that's what people said of Brexit, too.
  • Power. Maybe. Maybe not. This week the denials poured down from Toshiba re: Westinghouse. Meanwhile, FirstEnergy drops some bombs in its investor presentation.
  • Restaurants. Five chains that look like dogsh*t in 2017.
  • Retail. Apparently President Trump's promises to make America great again did not take into account all of the vitriol that would be unleashed towards his brands and resulting domino effect: case and point, Perfumania, which was teetering BEFORE folks wanted to wash themselves of the Trump stank. Speaking of mall-based stench, L Brands' Victoria's Secret ain't looking so hot these days as forward guidance looked bleak. And Amazon announced the release of its discount bras. Cue Jaws theme song.
  • Retail II. People have been talking about Toys R' Us for years and in '16 they took steps to deal with the over-levered balance sheet. The company continues to cut costs on the ops side too. Meanwhile, other companies like J.Crew are engaging in Intellectual Property machinations to stave off the inevitable and raise financing - the legality of which remains an open question.
  • Retail III - Department Stores. AlixPartners makes a cameo appearance in this interesting summary of the state of department stores. Choice stat: "As recently as 1999, department stores had total sales of $230 billion. Last year they came in at $155.5 billion, according to Census data." Accordingly, JC Penney is closing 140 stores (and probably still has 300 too many) and Sears is continuing to cut costs with 130 HQ firings. On point, Macy's reported numbers this past week. And so did Walmart - and the market initially responded in a way that is a smack to Warren Buffett (see last week's newsletter). Meanwhile TJX Cos. (TJ Maxx, Home Goods, Marshalls) showed that brick-and-mortar still has some legs (as did Nordstrom).
  • Fast Forward: Ocean Rig acknowledged that it's effed and the stock took a dive: a possible bankruptcy is on the horizon. And Cumulus Media had a setback in its efforts to restructure.
  • Rewind I: Sporting goods - analysts are starting to notice the massive bloodbath and, accordingly, downgraded Dick's Sporting Goods.
  • Rewind II: Let's hope that Sycamore Partners' purchase of The Limited fares better than Versa Capital Management's investment in Eastern Outfitters. $26.8mm price tag. Meanwhile, Wet Seal is available.
  • Chart of the Week: 
  • Tweet of the Week:

News for the Week of 2/5/17

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  • Athleisure. Start the funeral dirge. Under Armour reported dreadful numbers and guided poorly, citing the Sports Authority bankruptcy as a reason for decreased exposure to product. Then S&P kicked UA while it was down, downgrading its corporate credit rating from investment grade to high yield. It's not a restructuring candidate with double-digit growth but its results don't bode well for retailers, generally. Good thing J.Crew is NOW starting to focus on athleisure.
  • Avaya. Doing a little damage control.
  • Cumulus Media. What the public is learning.
  • Europe. Some expect a bigger year for restructuring in 2017.
  • Private Equity. Some doubts about portfolio quality.
  • Solar. The technology continues to take hold and grab share but there'll be a lot of carnage along the way. Meanwhile, Exxon got pummeled, noting over $2b in writedowns.
  • Retail. As distressed investors and bankruptcy professionals lick their chops over the possibilities with rue21, True Religion, Claire's Stores, J.Crew and others, "fast fashion" gets a second look as a culprit in the demise of retail (adding to the typical Amazon narrative). Still, even H&M and Uniqlo have announced intentions to scale back growth plans and/or close stores in the US.
  • More Retail. The Finish Line Inc. announced its sale of Jack Rabbit Sports this week (66 locations) for undisclosed terms. "Undisclosed terms" = GU gels and a jock-strap. Peter J. Soloman served as financial advisor. The quote, "The acquisition eases fears that the chain would face liquidation with no strategic buyers for the business"...basically sums up specialty retail. Reasons for the company's struggles are particular to specialty running stores, including, notably a marked decline in marathon participation. It's just not that easy to take a selfie while running 26.2.
  • Morer Retail - Canada. Once high-flying e-commerce startup Shoes.comcapitulates under the weight of multiple lawsuits, thwarting an IPO. In addition to shutting down the e-comm channels, the Vancouver-based company will shut down two brick-and-mortar locations - effectively flushing $45mm of PE down the toilet. Still, that URL seems like it would fetch some value...
  • Fast Forward: Walmart is looking to disrupt Amazon while Amazon is looking to disrupt Alphabet and Facebook. And UPS. In other words, Amazon is after EVERYONE.
  • Rewind I: Usually we reserve "rewind" for topics we've discussed in previous weeks but we're making an exception here: apparently HMV still exists in Canada. Or did. What a major blast to the past. What were they selling, exactly, 8-tracks?
  • Rewind II: Payless Shoes. 4400 stores? Wow.  Apropos, retail now the sector with the most distressed debt. In other retail news worth a rewind, Sports Direct is reportedly in talks to acquire Eastern Outfitters, the parent company of Bob's Stores and Eastern Mountain Sports from Versa Capital Management out of bankruptcy. If those names sound familiar, it's because Versa literally just bought them in bankruptcy last year in the Vestis Group case. So, add this to the growing list of Chapter 22 cases. 
  • Rewind III: Given our revelation last week of the connection between Puerto Rico-Dentons-New Gingrich, its intriguing that Greenberg Traurig is distancing itself from another Trump supporter.
  • Chart of the Week: Sometimes to disrupt the incumbents, you have to bleed cash like nobody's business...

News for the Week of 12/18/16

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  • Distressed Debt. More focus lately on Africa and the Middle East. Meanwhile, New Jersey is issuing transportation debt directly to state pension funds, cutting out middlemen in the issuance and driving down issuance costs. 
  • Hertz. Despite Carl Icahn's best efforts, this company has shown nothing but decline in the face of Uber and Lyft stealing revenue from the consumer-facing rental car business.
  • Renewable Energy. Wind and natural gas are on the rise in the United States: there's no holding it back. Interestingly, Statoil announced this week that it - like many others - is abandoning the Canadian oil sands to the tune of a $500mm impairment; meanwhile, Statoil paid $42.4mm for a lease to develop a wind farm 79k acres southeast of New York City. There were 33 rounds of bidding: the longest auction the agency has ever had for offshore wind. Earlier this week the wind farm offshore of Rhode Island went on-line.
  • Shenanigans. JCrew transferred its IP to a Cayman subsidiary triggering significant downward trending term loan activity; IHeartMedia elected not to pay $57mm of senior notes due to an affiliate upon maturity which may or may not be a CDS credit event; Cumulus Media launched a lawsuit against JPMorgan for allegedly unreasonably withholding consent to a proposed refinancing transaction that would significantly delever its balance sheet. 
  • Takata. The airbag recall keeps spreading - now to McLaren, Ferrari and Tesla. Chances are the company is looking on at the General Motors situation with great interest.
  • Twinkies. An interesting summary of the company's history - including stints in bankruptcy.
  • Fast Forward: Forbes Energy Services' fifth forbearance expires on 12/23, Stone Energy's equity committee hearing is 12/21, and CHC Group Limited may get its PSA ruling from Judge Houser this week.
  • Rewind I: Neiman Marcus reported dog-sh*t numbers this past week blaming a strong US dollar and general retail headwinds for a widened $23.5mm loss. Headwinds persist for retailers: here are top trends affecting retail go-forward.
  • Rewind II: For-Profit Education. The US FTC announced a $100mm settlement with DeVry University, capping a BRUTAL two years for for-profit education. Some highlights: ITT Technical Institute already shut down earlier in the year, the infamous Trump University recently settled a suit for $25mm, and last year Education Management Corporation paid a $95.5mm settlement and Corinthian Colleges filed for bankruptcy.
  • Rewind III: We discussed Amazon Go last week. Here are some more takes on the technology.
  • Chart of the Week: 

Tweet of the Week: