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posted by chromas on Tuesday October 16 2018, @07:59PM   Printer-friendly
from the and-isn't-it-ironic?-don't-you-think? dept.

Arthur T Knackerbracket has found the following story:

Sears, the one-time titan of American retail, filed for bankruptcy ahead of a $134 million debt payment due Monday and announced that it will close 142 stores.

For years, Sears has contended with the threat that it would become the latest big-name retailer to fall to online competition and crushing debt. The icon once known for its pristine catalogs, and more recently known for decrepit showrooms and a controversial chief executive, saw its stock price plunge last week after reports that it had hired an advisory firm to prepare a bankruptcy filing ahead of the Oct. 15 payment.

Early Monday morning, Sears announced it had filed for Chapter 11 bankruptcy -- which would allow it to reorganize and possibly reemerge from bankruptcy with some part of the business intact -- and received commitments for $300 million in debtor-in-possession financing to carry through the bankruptcy period while it restructures its debt and reorganizes its business.

[...] Sears will close 142 unprofitable stores near the end of this year, with liquidation sales at those stores expected to begin soon. It was not immediately clear where those stores are located or how many jobs would be affected. Those store closings are in addition to 46 others that were expected by next month.

[...] It has also already sold off many of its brands, including Craftsman tools, and hasn't turned a profit since 2010. Many of its most valuable properties have been sold off, with the other half leased and offering little cost savings from rent restructurings since Sears already pays below market rents.

-- submitted from IRC


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  • (Score: 5, Informative) by hemocyanin on Tuesday October 16 2018, @09:01PM (13 children)

    by hemocyanin (186) on Tuesday October 16 2018, @09:01PM (#749663) Journal

    It Was Vulture Capitalism that Killed Sears [prospect.org]:

    ... Sears is a prime example of how hedge funds and private-equity companies take over retailers, encumber them with debt in order to pay themselves massive windfall profits, and then leave the retailer without adequate operating capital to compete.

    ***

    In the case of Sears, the culprit is a hedge-fund operator named Edward Lampert, once a senior merger guy at Goldman Sachs. In 2005, Lampert merged Sears with Kmart, loaded both up with debt, and used some of the debt on stock buybacks to pump up the share price and enrich shareholders, notably himself and his hedge fund.

    ***

    The tactic of loading up a company with debt and then paying yourself exorbitant fees and dividends and manipulating the share price at the expense of the company ought to be illegal. It’s a plain conflict of interest. Likewise being both creditor and shareholder.

    Ditto the use of Chapter 11 bankruptcy in order to profit yet again by picking over the remains. A hedge-fund operator who drives a company into the ground by stripping assets for his own profit should not be permitted by bankruptcy court to keep control of the company. But that practice is the norm. Lampert will step down as CEO but remain chairman with a controlling ownership stake of what’s left of Sears.

    ***

    It was insider conflicts of interest at the expense of consumers, workers and investors, that inspired the New Deal to enact the Glass-Steagall Act, separating investment banking from commercial banking. If we ever resume the task of draining the true financial swamp, we need a Glass-Steagall for hedge funds, private-equity operators and bona-fide businesses.

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  • (Score: 5, Interesting) by PartTimeZombie on Tuesday October 16 2018, @09:58PM (2 children)

    by PartTimeZombie (4827) on Tuesday October 16 2018, @09:58PM (#749673)

    Closer to home for me, this also happened to a company called Dick Smith Electronics.

    Sold to an awful "investment company" who ran it into the ground, then screwed over the creditors.

    The fashion in which wealthy interests get legislation enacted for their own benefit is amazing. The Glass-Steagall Act was repealed, and the bankers then caused another crisis, which taxpayers paid for.

    There ought to be people up against walls, but as the golden rules states that "He who has the gold makes the rules" there won't be.

    • (Score: 1, Interesting) by Anonymous Coward on Tuesday October 16 2018, @10:18PM (1 child)

      by Anonymous Coward on Tuesday October 16 2018, @10:18PM (#749679)

      There won't be anybody up against the walls until the international working class organizes and reappropriates all the wealth stuck at the top for the social good and places it under democratic control. Nobody will do it for us.

      Maybe we don't even need to kill anybody. The entire city of Detroit for example likely needs to be completely re-piped [wsws.org]. The water crisis in Flint is looking like just the tip of iceberg. There's also the natural gas system "operated" by National Grid [wsws.org] in Massachusetts. Plenty of other infrastructure needs to be fixed. I'm sure we can retrain vulture capitalists and put them to some kind of use, closely supervised I'm sure, perhaps with complimentary orange jumpsuits, fixing the problems their socialized production (and externalities) and privatized gain caused.

      • (Score: 2) by PartTimeZombie on Wednesday October 17 2018, @12:50AM

        by PartTimeZombie (4827) on Wednesday October 17 2018, @12:50AM (#749730)

        I suspect the international working class have largely been sucked in by the ruling class to believe that they're better off with things the way they are.

        It's a shame, but the ruling class own the most efficient propaganda machine the world has ever known, and they're happy to use it.

  • (Score: 0) by Anonymous Coward on Tuesday October 16 2018, @10:09PM (4 children)

    by Anonymous Coward on Tuesday October 16 2018, @10:09PM (#749675)

    Is it legal for someone with fiduciary obligation to Company A to mortgage A's assets to Company B, which he also controls, and then bleed A to bankruptcy?

    It sounds like theft from the shareholding public.

    • (Score: 4, Informative) by Thexalon on Tuesday October 16 2018, @10:24PM (3 children)

      by Thexalon (636) on Tuesday October 16 2018, @10:24PM (#749681)

      Is it legal for someone with fiduciary obligation to Company A to mortgage A's assets to Company B, which he also controls, and then bleed A to bankruptcy?

      In a word, yes.

      It sounds like theft from the shareholding public.

      It is. It is also a theft from the employees (usually via their magically disappearing pension funds) and the other creditors of Company A.

      --
      The only thing that stops a bad guy with a compiler is a good guy with a compiler.
      • (Score: 1, Insightful) by Anonymous Coward on Tuesday October 16 2018, @11:06PM (2 children)

        by Anonymous Coward on Tuesday October 16 2018, @11:06PM (#749693)

        It's definitely not an ethical obligation to do that, it's permissible though. There is no law that requires that companies maximize shareholder value at any length necessary.

        I'm not really sure where people get that idea, but it's not a legal requirement. And such a legal requirement would be crazy as it would result in large numbers of people losing their entire investment if they buy in just as they're doing something particularly reckless to maximize value.

        The problem here, like most others in America, is that we've got legalized bribery. Individuals that buy companies just to saddle them with debt that then has to be written off in bankruptcy court should go to prison. The only reason it doesn't happen is because they've bribed the legislature and executive branches to look the other way.

        • (Score: 0) by Anonymous Coward on Wednesday October 17 2018, @01:34AM

          by Anonymous Coward on Wednesday October 17 2018, @01:34AM (#749758)

          The only reason it doesn't happen is because they've bribed the legislature and executive branches to look the other way.

          Why shouldn't they look the other way? The voters will reelect them anyway. That's all that matters. It's quite simple, this will continue as long as we let it. Your elected officials are not the ones to blame here. It's not their fault that their bad behavior is so rewarding. That issue lies directly with the voters who don't seem to understand the irony of their complaints... They bitch about the stone in their shoe, but won't atop for a second to take it out.

        • (Score: 2) by shortscreen on Wednesday October 17 2018, @09:24AM

          by shortscreen (2252) on Wednesday October 17 2018, @09:24AM (#749871) Journal

          Your post appears to be addressing something different than GP, but in any case...

          There is no law that requires that companies maximize shareholder value at any length necessary.

          The gov doesn't require it. But it's normal for "maximize shareholder value" to be stated in a corp's corporate charter. On occasion, investors have threatened to sue over actions that were perceived as failing to meet this goal. So naturally, execs can also fall back on this excuse "we must do X or we could be sued for not maximizing shareholder value!"

  • (Score: 0) by Anonymous Coward on Tuesday October 16 2018, @10:18PM (1 child)

    by Anonymous Coward on Tuesday October 16 2018, @10:18PM (#749678)

    Really, let's just stop "going private" entirely. It's always a forced tender offer for the shareholders. You can't plan for it. It makes your taxes a mess because you have to declare gains or losses when you weren't planning for it. I'd even settle for a looser version where you can't take the company private unless shares are priced at or above their all-time high. At least then they'd have an incentive to *really* turn the company around before taking it private, instead of turning it around after holders of common have been forced to sell at the bottom. This is one of the reasons why I hold few individual stocks these days. Asking yourself the question, "What are the odds of being forced into a tender offer during a downturn?" has too high a probability for a lot of individual stocks. Big blue chips are generally immune, but can take temporary hits when they do the acquiring. It's not quite so bad.

    • (Score: 0) by Anonymous Coward on Wednesday October 17 2018, @10:03PM

      by Anonymous Coward on Wednesday October 17 2018, @10:03PM (#750163)

      There are alternative reasons for going private, that actually hold up to scrutiny. Most recent large-scale example: EMC/Dell. Dell bought EMC, taking it private. Why? Once you dig through the crap, Dell wants to play the enterprise game on a higher level, and EMC's product portfolio and market placement looked good. On EMC's side, they suddenly got the activist-investor disease, and wanted to get rid of the idiots. Easiest way? Go private.

      Vulture capitalists and activist investors are two sides of the public/private coin.

  • (Score: 3, Informative) by Snotnose on Wednesday October 17 2018, @12:35AM

    by Snotnose (1623) on Wednesday October 17 2018, @12:35AM (#749721)

    ... Sears is a prime example of how hedge funds and private-equity companies take over retailers, encumber them with debt in order to pay themselves massive windfall profits, and then leave the retailer without adequate operating capital to compete.

    See also: Toys R Us. Good old Bain capitol, run by the R's favorite Mitt Romney, sucked all the value of that company into their own pocketbooks, then left the husk for stupid suckers to buy.

    How companies like Bain and Eddie's manage to not only survive, but thrive, is a giant mirror into why so many Americans are hurting while the 1%'ers are thriving.

    --
    Why shouldn't we judge a book by it's cover? It's got the author, title, and a summary of what the book's about.
  • (Score: 0) by Anonymous Coward on Wednesday October 17 2018, @03:09AM

    by Anonymous Coward on Wednesday October 17 2018, @03:09AM (#749796)

    It was not, vultures do not kill, they wait for a walking corpse to swoop in.

    Sears was just not with the times. Having started as a catalog company, I don't know why they didn't embrace e-commerce... but there you have it.

    Department store model is a fucking dinosaur. The economy of scale is not there in the times of just-in-time wearhousing and huge distribution centers, you actually end up with way too much overhead with your giant stores, and you cannot get rid of underperforming departments, so the store's bottom line is dragged down.

    I went to Sears here and there. It was always huge and empty. I generally went for things that were quality (not the generic made in China shit, but shirts that do not disolve in laundry etc). But what can you do in era of mis-information, where the only objective piece of information a consumer has about a product is fucking price. You can pay more, double or triple, but that doesn't aways mean more quality. Picking out quality items so you get value for your buck is a total hassle. I rather go with Costco shit, where I can get a good idea of quality based on the price of the item because they have trained purchasers that stock the store, and they don't mark shit up beyond that since their overhead comes from membership fees.

    So no, vulture capitalism had nothing to do with this mummified corpse going up in flames. If it hastened the demise, then it is actually a good thing, because it leads to more efficient marketplace when outdated companies go under, and new businesses move in to fill in the demand.

  • (Score: 4, Informative) by DeathMonkey on Wednesday October 17 2018, @06:24PM

    by DeathMonkey (1380) on Wednesday October 17 2018, @06:24PM (#750069) Journal

    "Sears has been dying for many years," Trump told reporters as he departed the White House on Monday to inspect hurricane damage in Florida. "It's been obviously improperly run for many years and it's a shame."

    Of course, he promoted one of those incompetent managers to be US Treasury Secretary! [chicagotribune.com]