How the mighty have fallen. Once upon a time, the Trump name was synonymous with getting rich through deal making, with vast real estate holdings and with entertainment (from his books like “How To Get Rich” to his restaurants and golf courses). It seemed if you put the Trump name on it, it was destined for success.
Apparently not any more. Beal Bank and Carl Icahn are battling Trump for control of the Atlantic City casinos that bear his name and apparently don’t feel they need the Trump name on the side of the buildings to make the businesses successful. The casinos have been in bankruptcy since February.
After the market closed on Sept. 16 (this past Wednesday), Eastman Kodak Co. announced a plan to refinance $575 million of its 3 3/8% convertible notes through two separate private placements. Good news for the holders of these bonds because they would get paid par, or the full $1,000 for each bond they held. But somebody may have known something about this deal before others.
The plan to retire these bonds would be especially good news for holders because these bonds were what are called broken convertibles. Convertible bonds do just what the name sounds like – they convert into a company’s common stock at some point in the future if the holder elects to do so. They become broken when the conversion price is significantly higher than the common stock price, making it very unlikely to convert. So, the bonds then trade more like a bond rather than the equity.
Once upon a time when people talked about Kohlberg Kravis Roberts, you thought of takeovers – some hostile and some friendly. The business has certainly changed and even more so by the credit crisis over the past year. Today, KKR essentially played the role of lender, if not of last resort, pretty close to it.
KKR agreed to loan Kodak up to $400 milli0n and along with the between 10% and 10.5% annual interest KKR receives for 8 years, it gets warrants to purchase up to nearly 20% of Kodak. This deal shows how difficult times have become for Kodak. Not only is it paying a higher interest rate on the loan, but it looks like it is a pay-in-kind loan – meaning Kodak doesn’t pay KKR cash interest but instead, new securities. So, the principal it owes when these bonds come due will balloon. Payment on these bonds become tomorrow’s headache, not today’s.
Madeleine Lim and Paul Vigna discuss the awkward timing of the China, US trade dispute; Eli Lilly’s job cuts and larger strategy questions; and President Obama’s trip to Wall Street to issue a reminder on financial reform.
Today’s relatively happy August sales news from some of the U.S.’s major retailers – particularly Target, Costco and Gap – suggests people are tiptoing back into stores. They’re buying back-to-school gear selectively and perhaps trading up from Walmart. But the good times aren’t rolling again, rising waters aren’t lifting all boats. (I’m sure I can come up with more cliches to signify the economy is still wobbly.) Consider Liz Claiborne Inc. Today, DJN colleague Karen Talley was first to report that Liz has hired turnaround firm Alvarez & Marsal to boost its working capital and avoid bankruptcy. Liz’s decline is a sign of just how much women’s apparel trends have changed. A few decades ago, Liz represented active comfort. This was precisely what women needed. We were performing all manner of tasks – from serious jobs to serious child-rearing – and we wanted clothes that reflected our dynamic lifestyles. Specifically, we required good-looking clothes which weren’t so fashionable they constricted our range of motion. This worked well until we demanded more: Over time, we came to want distinctive, youthful flair combined with comfort. In effect, we were no longer willing to resemble one another sartorially. We wanted to dress and accessorize originally and freshly. And so, entrepreneurs wielding fabulous, affordable costume jewelry, scarves, handbags, shoes – not to mention skirts, dresses and slacks – popped up. To try to keep up, Liz made eclectic acquisitions – Lucky Brand Jeans, Kate Spade, Juicy Couture et al. And along the way, Liz got lost.
David Oreck, founder of a well-known maker of vacuums and air purifiers, says he’s upset his namesake company is in bankruptcy. He says Nashville, Tenn.-based Oreck Corp. was a perfectly profitable company when he sold his stake in it to a private equity firm in 2004. He blames the firm, New York-based American Securities Capital […]