If it can borrow against a portion of its inventory, sells off innovel solutions and its unencumbered real estate it can survive for a couple more years. Thats if cash burn remains the same and pension liabilities do not increase.
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Well the pbgc has already secured kcd and some real estate as collateral against the pension deficit - however expensive wit that there will still be a gaping hole - so yes a bankruptcy would saddle the pbgc with the rest of the liability- if Sears stock falls to less than $1 billion market cap the pbgc can under the terms seize kcd and some of the real estate- $ 1 bill is around an so of just under $10.
As it stands from their own audited accounts the company's liabilities are more than their assets- there is no hidden value in leases or innovel or anything else otherwise it would have had to declare it on the balance sheet- what we do know is ther are roughly $5 billion of assets left to sell/loan against and a burn rate of around $2.2 billion a year hence why 2 years tops seems a reasonable timeframe- but cash burn is increasing and the last 6 months of the 2 year period would be ugly for Sears. Something lose to consider if there is a market correction/ crash as seems lik pelt that pension deficit will widen.
If that. Does a company have to declare bankruptcy in order to dump its pension obligations onto PBGC? That might be part of the plan.
in an orderly liquidation with the pension liabilities, the debt pile and the ad hoc loans eddie has made secured against real estate and inventory there will be nothing left for the shareholders, and the stock price will be worth pennies.
Too bad there are no easy way to know when Sears store leases will be up at most mall stores,we have been wondering that at our store,but it is a big secret when the lease is up,it was rumored to be this year
But we are still here and since tons of Christmas decorations came in on the last truck,I guess we will be here as least till then.
I think 2 years is optimistic. I don't think Eddie will let Sears go bankrupt. I think he is just waiting for as many leases and contracts to expire as he can, so he can do an orderly liquidation.
He will reduce liabilities, and sell assets, so he can maximize the value he can get. Then, he will sell the remaining merchandise as quickly as possible, or to another company. Then, Sears will be no more.
I don't have any insight into leases or contracts, but those really dictate when the end will come. And not all stores need to run our their leases-they can be bought out, or sold to other companies.
It's all an accounting game.
Agreed- if Eddie keeps on lending 2 years is about right as long as there are assets to secure against.