Embattled Sears Obtains Funding From ESL Investments and Bill Gates’ Cascade
In a separate 13D filing, Edward S. Lampert’s ESL Investments currently owns 64.52 million shares of Sears Holdings Corp (NASDAQ:SHLD), which account for 57.8% of the company’s outstanding shares. This compares with the stake of 64.17 million shares reported in ESL’s previous 13D filing on the company, which was filed with the SEC in early February. The filing also indicated that the embattled retailer entered into a $500 million secured loan facility last week, with $250 million received immediately. The remaining $250 million may be drawn in the future should the company fail to raise additional capital through a syndicated loan. A total of $125 million of the initial funding was provided by Mr. Lampert’s ESL Investments, while the remaining capital was offered by Cascade Investment LLC, the investment firm that manages Bill Gates’ personal wealth. The loan carries an interest rate of 8% per annum and is secured by mortgages on 13 properties owned by Sears Holdings; the loan will be secured by an additional eight properties should the company raise additional capital through the secured loan facility.
Sears Holdings Corp (NASDAQ:SHLD) operates a network of 1,672 full-line and specialty retail stores across the United States under Kmart and Sears brands. The struggling retailer has been having a hard time stopping the decline of its annual revenues, as the company’s top-line results have declined each year since 2007. Eddie Lampert, Chairman and Chief Executive Officer of Sears Holdings, has failed to stop the retailer’s freefall in recent years. The aforementioned secured loan facility will enable the company to complete its so-called transition into a more asset-light integrated retailer. The company’s revenues for fiscal 2015 that ended January 30 were $25.15 billion, down from $31.20 billion in fiscal 2014 and $36.19 billion in fiscal 2013. Sears Holdings has seen its share price decline 65% in the past 52 weeks. The number of money managers from our system with stakes in the retailer dropped to 20 from 22 during the December quarter. Murray Stahl’s Horizon Asset Management reported ownership of 3.13 million shares in Sears Holdings Corp (NASDAQ:SHLD) through the round of 13Fs for the final quarter of 2015.
Harvest Capital’s Ongoing Proxy Fight with Green Dot
In a proxy statement with the SEC, Joseph A. Jolson’s Harvest Capital Strategies LLC is seeking the support of Green Dot Corporation (NYSE:GDOT)’s shareholders for the election of its three nominees, Saturnino Fanlo, George W. Gresham, and Philip B. Livingston, to the company’s Board of Directors at its upcoming annual meeting of shareholders. Harvest Capital claimed that “Mr. Streit [Steve Streit, Green Dot’s Chairman and Chief Executive Officer] and other long-tenured directors are preventing Green Dot from capitalizing on meaningful opportunities in the evolving payments industry”. As discussed in previous articles about this proxy fight, Harvest Capital Strategies believes that the provider of reloadable prepaid debit cards is well-positioned to almost double its earnings per share within three years should the company implement several “self-help” initiatives proposed by the activist shareholder. Some of those initiatives include: the removal of Mr. Streit as CEO and install a proven leader who would inject new dynamism into the talented Green Dot organization, as well as rebuild credibility in the company throughout the investment community; the reconstruction of the Board and adoption of policies targeting shareholder alignment; the readjustment of Green Dot’s strategic initiatives to balance realistic growth targets with profitability; and the alteration of the company’s cost structure and optimization of capital structure. To be more detailed on some of these initiatives, the company’s compensation and benefits, processing expenses, as well as general and administrative expenses have each increased at a higher rate than revenue since 2010, so Green Dot Corporation (NYSE:GDOT) might need to implement some restructuring indeed. According to fresh filings, Harvest Capital owns 4.72 million shares of Green Dot, which constitute 9.5% of the company’s total number of outstanding shares. Green Dot’s shares have gained 32% since the beginning of 2016, with the activist campaign playing a big role in this exceptional performance. There were 12 hedge funds monitored by our team with long positions in Green Dot at the end of December, hoarding 11% of the company’s shares. Ken Griffin’s Citadel Advisors LLC was the owner of 1.46 million shares in Green Dot Corporation (NYSE:GDOT) at the end of December.