West Marine Restructures Debt

[jlynker]

Originally Posted by jlynker

I do get your point that any one person doesn't make/brake the entire company however, a CEO is pretty important player in the role of organizing executive staff... refer to my earlier post weeks ago - WM on Loan Funding doesn't have to behave like a capitalist company, they on welfare. That - and the executive leadership team throwing that loan cash in the air - didn't have to earn it. ...and they don't have to pay it back until the BC judge drops the gavel.

..and I'll raise you that L Capitan is probably sucking it down from the Frenchies as well. Might even go BC and take their marbles to the next table.

https://www.lcatterton.com/Investmen...nt/M:nag_major

I see Birkenstock and West Marine. I don't see Birkenstock saving West Marine. I do see Boll & Branch and DragonFly.. but as a private investor, they don't have to derive profits from customer sales. They hold a dental firm who sucks on insurance claims.

btw, PainDoctor.com appears to be no more. So there's that...

So... what is there strategy? Do these Italian companies actually exist? Oh, and will another $225M next year do the trick?

[Letterkenny]

Originally Posted by jlynker

A public traded company has access to cash that is non-obligated. Granted equities were issued that can go bust, but if their value is less than the assets retained in bankruptcy, net gain. BC doesn't measure intent, just liabilities.

If L Catt thought WM was valued, they'd want to play with shareholders wad of cash because there's no obligation to deliver on publicly traded stocks. If, as a publicly traded company, L Catt thought they were going to take a dive, they'd short. But shorting has risk... so, take it private, those loans ARE debt creating a liability that must be enforced in BC ... oh and by taking it private and writing equities, as long as the notes going bust are less than the assets retained in BC, again, court doesn't care if L Catt profits of bankrupted properties or sales of caulk.

Think of the price per square foot of Seattle space if they remove the racks of Gill foulies and put in Google cubes? That's the real valuation battle I see happening. There was nothing wrong with the Watsonville Headquarters, except that by loading up WM with debt of a new high rise in Ft Lauderdale, one that caulk sales won't support, West Marine Real Estate and West Marine Supplies (Port Supply, et al) will have to part ways for ol' L Catt. Nothing personal... just valuation Florida style. Ft Lauderdale is where Sports Authority went to die in their privatization. This trick is getting old.

I don’t understand what you are talking about with L Catt “playing with the shareholders wads of cash”. Once they come in, they are the only shareholders. They bought out all of them. If they go bankrupt, they are out all the cash invested. That simple. They could have extracted that by issuing debt and paying themselves a dividend but doesn’t seem like that’s the case and not a valid long-term fund strategy. This whole logic doesn’t make sense and is not how these funds are operated.

Originally Posted by jlynker

I do get your point that any one person doesn't make/brake the entire company however, a CEO is pretty important player in the role of organizing executive staff... refer to my earlier post weeks ago - WM on Loan Funding doesn't have to behave like a capitalist company, they on welfare. That - and the executive leadership team throwing that loan cash in the air - didn't have to earn it. ...and they don't have to pay it back until the BC judge drops the gavel.

I’m not saying he’s not important but he’s not driving L Catt. They make the decisions with financing he just says okay and tries to keep the ship going.

Originally Posted by jlynker

..and I'll raise you that L Capitan is probably sucking it down from the Frenchies as well. Might even go BC and take their marbles to the next table.

https://www.lcatterton.com/Investmen...nt/M:nag_major

I see Birkenstock and West Marine. I don't see Birkenstock saving West Marine. I do see Boll & Branch and DragonFly.. but as a private investor, they don't have to derive profits from customer sales. They hold a dental firm who sucks on insurance claims.

btw, PainDoctor.com appears to be no more. So there's that...

So... what is there strategy? Do these Italian companies actually exist? Oh, and will another $225M next year do the trick?

These companies don’t make money from going bankrupt. What’s the point? They buy them and can shut it down day one if they want and that is something that does happen. They will make them take on a lot of debt, yes, but if a fund has all their portfolio companies go bankrupt, then the lenders won’t work with the fund. Pretty simple.

[jlynker]

Originally Posted by Letterkenny

I don’t understand what you are talking about with L Catt “playing with the shareholders wads of cash”. Once they come in, they are the only shareholders. They bought out all of them. If they go bankrupt, they are out all the cash invested. That simple. They could have extracted that by issuing debt and paying themselves a dividend but doesn’t seem like that’s the case and not a valid long-term fund strategy. This whole logic doesn’t make sense and is not how these funds are operated.

I’m not saying he’s not important but he’s not driving L Catt. They make the decisions with financing he just says okay and tries to keep the ship going.


These companies don’t make money from going bankrupt. What’s the point? They buy them and can shut it down day one if they want and that is something that does happen. They will make them take on a lot of debt, yes, but if a fund has all their portfolio companies go bankrupt, then the lenders won’t work with the fund. Pretty simple.

"I don’t understand what you are talking about with L Catt “playing with the shareholders wads of cash”. Once they come in, they are the only shareholders."...

To control a company, you only need to be majority shareholder, not 100% shareholder. That means max, 51%. Once in control, the remaining investors are available shares... Now this assumes healthy shares. If shares are not healthy, where's the value? ... when you have 100% control, you can, as you say, control the CEO choices (to an extent) .. but also, that consortium of lenders, get to HOOK their way into operating loans. 'Load em up with debt, then recall it in BC'.. And BC is the transposition from bad management to whoo-hoo windfall.

They do make money from their targets going bankrupt. Please read the Sports Authority wiki post. Invest, control, load the target with dept, bc, collect... it's a scam. legal, but a scam.

[Letterkenny]

Originally Posted by jlynker

"I don’t understand what you are talking about with L Catt “playing with the shareholders wads of cash”. Once they come in, they are the only shareholders."...

To control a company, you only need to be majority shareholder, not 100% shareholder. That means max, 51%. Once in control, the remaining investors are available shares... Now this assumes healthy shares. If shares are not healthy, where's the value? ... when you have 100% control, you can, as you say, control the CEO choices (to an extent) .. but also, that consortium of lenders, get to HOOK their way into operating loans. 'Load em up with debt, then recall it in BC'.. And BC is the transposition from bad management to whoo-hoo windfall.

They do make money from their targets going bankrupt. Please read the Sports Authority wiki post. Invest, control, load the target with dept, bc, collect... it's a scam. legal, but a scam.

I will say that does not happen frequently in the public company realm. Boards usually negotiate full purchases, there are minority shareholder rights, usually poison pills in place, etc. etc. When PE gets involved from a mature public company, they take it all. Then the firm will dictate anything that they want, new CEO, new financing, etc. What happens ultimately depends on what the acquiring fund specializes in and the current status of the target that was acquired.

While bankruptcy can be quite the strategic move, it doesn’t really work as you say. There’s no windfall. If public, the shares being traded are frozen and most likely the entity is delisted. The equity holders (in this case, the PE shop) aren’t really going to get anything. Might get something if they can turn it around in a chapter 11 scenario down the road. The whole point of loading it up with debt is for them to reduce their risk and increase ROI. That said, they are always going to have skin in the game.

One aspect you aren’t considering here are the lenders. They know exactly what is happening at these companies and are not going to lend if it is too much risk as they don’t want their capital to evaporate either. If they don’t like the direction of what the entity is doing, they won’t issue covenant waivers and can call the debt to essentially take over the company. They aren’t in the business of owning these companies so it is not what they prefer but at the end of the day, they are protecting themselves from risk as much as they can and if they keep getting funding requests from portfolio companies from the same PE shop that has a poor credit history, they wont lend.

Lastly, read the Sports Authority wiki and there’s nothing there about how the PE shop made money from this. I had a clients that was an unsecured creditor in their BK (which is the proper abbreviation) so followed along with what happened. I have also worked on dozens of PE shop acquisitions of taking companies private, SPAC/DE-SPAC, IPOs, etc. so I am very aware of how these transactions work and the fund plan. Unfortunately, a lot of the information said here isn’t correct

[Kettlewell]

OT a bit, but this whole discussion came home to me when I was in Newport for the boat show. I took a walk down Lower Thames Street past where there used to be J.T.'s Chandlery back in the day. You could walk in there and purchase delicate SS shackles right up to ginormous ones used by the fishing trawlers that still tied up right downtown. I loved just browsing at places like that, and they were found in many seaside towns where we sailed. Fawcett's was right there on the water in Annapolis. As a consequence, I spent a fair bit of money at those old-time chandlers because they were right there when I needed them, even if the prices weren't the best. Today, one is forced to order most stuff online, even while cruising, because it just isn't readily available anywhere near the waterfront. Sure, sometimes there is a West Marine well inland from the coast, but chances are slim they will have what you need in stock, and even if they do by the time you add in the charge for an Uber or a taxi to get there and back you might as well order online and get whatever delivered right to a marina. This puts the needs of cruising sailors even further down the list of people the WM's of the world are trying to cater to. I don't know if they still do it, but there was one WM I went to numerous times that had someone there who would make up custom battery cables and such on the spot. You could get custom splicing done at some of them. No more! They know their customers, and they are mostly local, small boaters, which is why the stores are now full of wakeboard stuff, coolers, and fashion items.

[Chotu]

Originally Posted by Kettlewell

OT a bit, but this whole discussion came home to me when I was in Newport for the boat show. I took a walk down Lower Thames Street past where there used to be J.T.'s Chandlery back in the day. You could walk in there and purchase delicate SS shackles right up to ginormous ones used by the fishing trawlers that still tied up right downtown. I loved just browsing at places like that, and they were found in many seaside towns where we sailed. Fawcett's was right there on the water in Annapolis. As a consequence, I spent a fair bit of money at those old-time chandlers because they were right there when I needed them, even if the prices weren't the best. Today, one is forced to order most stuff online, even while cruising, because it just isn't readily available anywhere near the waterfront. Sure, sometimes there is a West Marine well inland from the coast, but chances are slim they will have what you need in stock, and even if they do by the time you add in the charge for an Uber or a taxi to get there and back you might as well order online and get whatever delivered right to a marina. This puts the needs of cruising sailors even further down the list of people the WM's of the world are trying to cater to. I don't know if they still do it, but there was one WM I went to numerous times that had someone there who would make up custom battery cables and such on the spot. You could get custom splicing done at some of them. No more! They know their customers, and they are mostly local, small boaters, which is why the stores are now full of wakeboard stuff, coolers, and fashion items.

Exactly!

there are barely any active cruising sailors. Even on this forum there are less than the number of people who are in their home port and enjoy sailing. Or have crused before.

It’s a terrible market. Very small.

however, small power boats are the largest selling type of boat by a wide margin. You’re right. They are just catering to the market.

I used to love that chandlery in Newport. I always had something broken when I showed up there and knew I could go get the parts there and fix it.

[danstanford]

Originally Posted by Kettlewell

OT a bit, but this whole discussion came home to me when I was in Newport for the boat show. I took a walk down Lower Thames Street past where there used to be J.T.'s Chandlery back in the day. You could walk in there and purchase delicate SS shackles right up to ginormous ones used by the fishing trawlers that still tied up right downtown. I loved just browsing at places like that, and they were found in many seaside towns where we sailed. Fawcett's was right there on the water in Annapolis. As a consequence, I spent a fair bit of money at those old-time chandlers because they were right there when I needed them, even if the prices weren't the best. Today, one is forced to order most stuff online, even while cruising, because it just isn't readily available anywhere near the waterfront. Sure, sometimes there is a West Marine well inland from the coast, but chances are slim they will have what you need in stock, and even if they do by the time you add in the charge for an Uber or a taxi to get there and back you might as well order online and get whatever delivered right to a marina. This puts the needs of cruising sailors even further down the list of people the WM's of the world are trying to cater to. I don't know if they still do it, but there was one WM I went to numerous times that had someone there who would make up custom battery cables and such on the spot. You could get custom splicing done at some of them. No more! They know their customers, and they are mostly local, small boaters, which is why the stores are now full of wakeboard stuff, coolers, and fashion items.

Thanks JJ, this is an important element in the discussion.

[jlynker]

Originally Posted by Letterkenny

I will say that does not happen frequently in the public company realm. Boards usually negotiate full purchases, there are minority shareholder rights, usually poison pills in place, etc. etc. When PE gets involved from a mature public company, they take it all. Then the firm will dictate anything that they want, new CEO, new financing, etc. What happens ultimately depends on what the acquiring fund specializes in and the current status of the target that was acquired.

While bankruptcy can be quite the strategic move, it doesn’t really work as you say. There’s no windfall. If public, the shares being traded are frozen and most likely the entity is delisted. The equity holders (in this case, the PE shop) aren’t really going to get anything. Might get something if they can turn it around in a chapter 11 scenario down the road. The whole point of loading it up with debt is for them to reduce their risk and increase ROI. That said, they are always going to have skin in the game.

One aspect you aren’t considering here are the lenders. They know exactly what is happening at these companies and are not going to lend if it is too much risk as they don’t want their capital to evaporate either. If they don’t like the direction of what the entity is doing, they won’t issue covenant waivers and can call the debt to essentially take over the company. They aren’t in the business of owning these companies so it is not what they prefer but at the end of the day, they are protecting themselves from risk as much as they can and if they keep getting funding requests from portfolio companies from the same PE shop that has a poor credit history, they wont lend.

Lastly, read the Sports Authority wiki and there’s nothing there about how the PE shop made money from this. I had a clients that was an unsecured creditor in their BK (which is the proper abbreviation) so followed along with what happened. I have also worked on dozens of PE shop acquisitions of taking companies private, SPAC/DE-SPAC, IPOs, etc. so I am very aware of how these transactions work and the fund plan. Unfortunately, a lot of the information said here isn’t correct

I see the disconnect in our arguments. You say PE gets nothing then you say the lenders... properties & assets just don't *poof* into non-existence. What if the lenders & PE are (drum roll please) "Cahoutists"? New word for my songwriting catalog... That IS the Bain/SA scam.

Load em up with debt, hang em out to dry. Come collect on the back side of BC court who transposed the remaining value. Case law here really confuses me because it does attract incentive to do just this.

But they can't just load up debt aimlessly, that debt needs to attached to assets that are valuable in their own right but not essential to the operational cash flow of the entity. Solid molecules of real estate does just the trick.

WM may actually survive in their rental properties but 1 Broward Blvd will be the BC Annex where all PE owned companies go to be raped. Bain was in Ft Lauderdale for the SA BC.

[jlynker]

Originally Posted by Kettlewell

OT a bit, but this whole discussion came home to me when I was in Newport for the boat show. I took a walk down Lower Thames Street past where there used to be J.T.'s Chandlery back in the day. You could walk in there and purchase delicate SS shackles right up to ginormous ones used by the fishing trawlers that still tied up right downtown. I loved just browsing at places like that, and they were found in many seaside towns where we sailed. Fawcett's was right there on the water in Annapolis. As a consequence, I spent a fair bit of money at those old-time chandlers because they were right there when I needed them, even if the prices weren't the best. Today, one is forced to order most stuff online, even while cruising, because it just isn't readily available anywhere near the waterfront. Sure, sometimes there is a West Marine well inland from the coast, but chances are slim they will have what you need in stock, and even if they do by the time you add in the charge for an Uber or a taxi to get there and back you might as well order online and get whatever delivered right to a marina. This puts the needs of cruising sailors even further down the list of people the WM's of the world are trying to cater to. I don't know if they still do it, but there was one WM I went to numerous times that had someone there who would make up custom battery cables and such on the spot. You could get custom splicing done at some of them. No more! They know their customers, and they are mostly local, small boaters, which is why the stores are now full of wakeboard stuff, coolers, and fashion items.

Yes - the 30,000 view battle going on is Real Estate valuation. In a changing market. WM has 3 components to their value (any retailer actually) - Parts, People & Places. The places are becoming more valuable than the Parts/People so.. bye-bye parts & people... Places, you win!

But, sq ft for foot traffic is nothing compared to highly paid executives in a 6x10 cell I mean cube... looking out the window at all the prostitutes homeless people ... sorry for the social commentary.

[Letterkenny]

Originally Posted by jlynker

I see the disconnect in our arguments. You say PE gets nothing then you say the lenders... properties & assets just don't *poof* into non-existence. What if the lenders & PE are (drum roll please) "Cahoutists"? New word for my songwriting catalog... That IS the Bain/SA scam.

Load em up with debt, hang em out to dry. Come collect on the back side of BC court who transposed the remaining value. Case law here really confuses me because it does attract incentive to do just this.

But they can't just load up debt aimlessly, that debt needs to attached to assets that are valuable in their own right but not essential to the operational cash flow of the entity. Solid molecules of real estate does just the trick.

WM may actually survive in their rental properties but 1 Broward Blvd will be the BC Annex where all PE owned companies go to be raped. Bain was in Ft Lauderdale for the SA BC.

It sounds like you are just gauging this from your outside speculation. From first hand experience, that’s not how this works and there’s a lot wrong about your argument.

[jlynker]

Originally Posted by Letterkenny

It sounds like you are just gauging this from your outside speculation. From first hand experience, that’s not how this works and there’s a lot wrong about your argument.

Sounds like, but I'm more informed than the average internet troll...

https://ir.law.utk.edu/cgi/viewconte...dlawbankruptcy

https://www.washingtonpost.com/blogs...mRoP_blog.html

This is behind a paywall, but worth it:

https://www.rollingstone.com/politic...talism-241519/

I've been following these types of deals for a long time because they really hurt people. Trump had 5 bankruptcies and where it appears many corporations are abusing BC courts, as an investor myself, I follow just as a good community player. It's good for my community to not have retailers screwing people over.

My association with WM was customer for 2 decades, worked there a summer, more customer for 2 more decades then banned by ******** on the floor who had derogatory names for me... I never thought to or desired to invest in West Marine. So... L Catt doing so really didn't make sense either until I started reading all of the Real Estate sales news with West Marine Real Estate (which is it's own company) ... and of course, a $150M.. ah, wait for it.. $125M ... loans... now we're talking some real welfare diggs...

Pass the popccorn! Please...

[jlynker]

Originally Posted by Letterkenny

It sounds like you are just gauging this from your outside speculation. From first hand experience, that’s not how this works and there’s a lot wrong about your argument.

Oh, and if you hear the sound of a personal grudge, you're right but, my championing WM's demise through bankruptcy (and I do) won't solve my gripe with the store 500' from my boat. They're in rental space and will just change their name to The Store That Used to Be Rude to West Marine Customers.

While it might seem reasonable that WM would downsize to just main outlets like the Downtown Seattle Store, those new properties is where their monies are tied up and would be assets in the BC.. I suspect a consortium of suppliers (Lewmar, Foruno, ...) would get together at auction for the retail carcass in the form of top 10 outlets in rental properties. My local store would be on that list but... PNW has a big culture of local support and a couple very good local suppliers already so... one can hope.

[Letterkenny]

Originally Posted by jlynker

Oh, and if you hear the sound of a personal grudge, you're right but, my championing WM's demise through bankruptcy (and I do) won't solve my gripe with the store 500' from my boat. They're in rental space and will just change their name to The Store That Used to Be Rude to West Marine Customers.

While it might seem reasonable that WM would downsize to just main outlets like the Downtown Seattle Store, those new properties is where their monies are tied up and would be assets in the BC.. I suspect a consortium of suppliers (Lewmar, Foruno, ...) would get together at auction for the retail carcass in the form of top 10 outlets in rental properties. My local store would be on that list but... PNW has a big culture of local support and a couple very good local suppliers already so... one can hope.

While I can appreciate you trying to be more informed, I can say there is a lot of disconnect from reality. I work with these firms all the time so am very attuned to what they do.

As they are private and I cannot read their financials, I’m 90% certain that they don’t own any of these locations (there are press releases about them acquiring new leases) and they are all leases so what you say is an asset is really just a liability. The market for subleasing spaces isn’t there right now especially for their type of space (at least better than office space, be careful there).

At the end of the day, if WM went BK, main assets will be their inventory followed by intangibles with varying value (brand name, trademark, customer lists, etc.) all of which (outside of customer lists), could have very low value like Circuit City back when they went out. There’s not really much more there for a brick and mortar store.

[jlynker]

Originally Posted by Letterkenny

While I can appreciate you trying to be more informed, I can say there is a lot of disconnect from reality. I work with these firms all the time so am very attuned to what they do.

As they are private and I cannot read their financials, I’m 90% certain that they don’t own any of these locations (there are press releases about them acquiring new leases) and they are all leases so what you say is an asset is really just a liability. The market for subleasing spaces isn’t there right now especially for their type of space (at least better than office space, be careful there).

At the end of the day, if WM went BK, main assets will be their inventory followed by intangibles with varying value (brand name, trademark, customer lists, etc.) all of which (outside of customer lists), could have very low value like Circuit City back when they went out. There’s not really much more there for a brick and mortar store.

UT oh... you're right. At least 1 Browsrd, SF & Seattle are leases... the sold properties (Watsonville, Chicago, ...) are, well sold.

The UT oh? If WM sold all their assets & they ALMOST BK'd on $225M in loans... case closed. They can't stay afloat.

Rubin as CEO is metaphor for "Lipstck on a pig". Perhaps it's WM shaking down L Catt as the RE sales occurred before L Catt acquired WM. Unless there was a bankroll already consumed by L Catt at purchase.

/TAPS

[CaptTom]

I'm following this in hopes of learning some of this high-finance jargon. Kinda interesting, thanks!

That said, it sure sounds like vultures squabbling over a carcass.

No talk of how they are going to offer value to their customers, which is the only way you can truly save or grow a company. Seems it's now all about who gets the spoils.

It's too bad. WM was a good source back in the day. I was at one store last week. It was a slow period and I was the only one in the store. The two staffers there were very friendly and helped me out a bit. I was thinking of getting a new dinghy next spring, and WM is still competitive in that area. I may have to buy it sooner. They might be gone by spring.