samsung

From NyTimes

HONG KONG — Under pressure from investors, Samsung Electronics said on Tuesday it might restructure its vast operations as a way to unlock shareholder value.

The family-controlled South Korean electronics giant said it would consider creating a holding company and listing its operations on international exchanges. Samsung will begin a review of its options that will take at least six months, it said.

The review comes after an American hedge fund, Elliott Management, called for the company to take steps to bolster its share price. Those steps included creating a holding company and a listing on an American exchange by one of its arms.

A Samsung move to restructure could ease some of those concerns, according to Sanford C. Bernstein & Company, a research and brokerage firm.

“Post restructure, we expect to see more alignments between the de facto ‘owners’ of Samsung group and the rest of the shareholders, and thus, expect more shareholder friendly measures” like dividends and buybacks, wrote the analyst Mark Newman.

Samsung also said it would increase its dividend by more than one-third from this year’s level and buy back more shares.

Although Elliott is a small shareholder, the call gained traction with other shareholders after Samsung suffered setbacks. The biggest was the recall and cancellation of its Galaxy Note 7 smartphone last month. The phone won strong reviews for its design and was considered a step forward in its competition with Apple’s popular iPhone. But some of the units burst into flame, and Samsung canceled the phone after a bungled recall process.

Still, Elliott had argued that the electronics company’s problems went beyond defective phones. In a letter this autumn, it said that the opaque and densely linked holding structure of Samsung’s many companies meant the true value of the company’s electronics operations had not been fully reflected in its share price.

Samsung Electronics is part of the larger Samsung empire, a constellation of companies controlled by the family of its chairman, Lee Kun-hee. Jay Y. Lee, Mr. Lee’s son and vice chairman of Samsung Electronics, was expected to be a key part of any restructuring. Last month he was approved as a director of the company, which was widely seen as increasing his influence there.

The push by Elliott comes after it lost an effort last year to halt the merger of Samsung C&T and Cheil Industries, a move designed to consolidate power in the hands of the younger Mr. Lee.

Although that effort won the backing of international investors, it also earned Elliott the moniker “vulture capitalist” within South Korea, where large family-run companies, known as chaebol, often fiercely resist outside intervention.

This time, however, things could be different. The company has taken a softer tone, and in the announcement on Tuesday, Samsung seemed to have addressed most of the points in Elliott’s letter, though it stopped short of committing to a full-on restructuring. Instead it said that it had “retained external advisers to conduct a thorough review of the optimal corporate structure,” which would take six months.

In its letter, Elliott argued that the company should divide itself into two publicly traded companies: a holding company that serves as the Lee family’s main ownership vehicle, and a separate company that would hold the electronics business.

FILE - This Monday, Aug. 11, 2015, file photo, shows a Target store in Miami. Target’s five consecutive quarters of increases in a key sales measure suggest there are more shoppers, who are returning to the discounter that pioneered the concept of putting affordable, chic fashions under the same roof as groceries and toiletries. (AP Photo/Lynne Sladky, File)

From NyTimes

Target’s bull’s-eye will be hard to repeat.

After a big miss over the summer, the American retailer improved its marksmanship with an impressive jump in online sales and raised its 2016 profit forecast. Even so, Target needs more customers wandering its aisles over the holiday season and a sustainable plan to compete with Amazon.

By most accounts, Target turned things around in its latest quarter. Although overall revenue tumbled nearly 7 percent for the three months ending Oct. 29, to $16 billion, the company surpassed profit and sales forecasts. More high-margin apparel, home and baby items flew off the shelves. E-commerce revenue also grew a healthy 26 percent.

The results, which sent Target shares up almost 7 percent on Wednesday, represent a stark turnaround from the previous quarter, when the company blamed a drop in demand for Apple iPhones and such for its weakness. A rocky grocery business and management shake-ups augured more challenges. In August, it cut its full-year earnings expectations.

This latest improvement may be short-lived, however. The retailer’s chief executive, Brian Cornell, was peppier about the final months of the year but not especially cheery. Target expects comparable-store sales to be flat this quarter. Restoring growth in foot traffic is a priority.

Marketing its more than 1,000 retail locations as pickup destinations for online orders can help. So, too, should opening stores in cities like New York. Amazon’s product breadth and ever-speedier home delivery are formidable, however. Walmart also is plowing headlong into digital with the recent $3.3 billion acquisition of Jet.com. Trading at just 13 times earnings, below many of its peers, could make Target a mark for investors. It is just not clear yet whether the company can maintain a steady aim.

nasty-gail

From LaTimes

Los Angeles-based women’s clothing retailer Nasty Gal Inc. has filed for Chapter 11 bankruptcy protection.

Chief Executive Sheree Waterson said the move will help the company address “immediate liquidity issues,” as well as restructure its balance sheet and correct “structural issues” such as high occupancy costs.

“We expect to maintain our high level of customer service and emerge stronger and even better able to deliver the product and experience that our customers expect and that we take pride in bringing to market,” she said in a statement Wednesday.

Nasty Gal estimated both its assets and its liabilities at between $10 million and $50 million in its filing Wednesday with the U.S. Bankruptcy Court for the Central District of California.

Tech news site Recode also reported that founder Sophia Amoruso was resigning as the company’s executive chairwoman. Nasty Gal did not respond to The Times’ questions about this issue.

The provocative retailer got its start in 2006 when Amoruso began selling vintage clothes on EBay. It has since expanded beyond its e-commerce roots by adding two bricks-and-mortar retail stores in Los Angeles.

In an interview with The Times in 2014, Amoruso described Nasty Gal’s store on Melrose Avenue as “a curated experience that combines the best of what we’re designing with the best vintage and the best of other brands.”

Amoruso has also published a book, “#Girlboss,” which chronicles how she founded Nasty Gal and her business philosophy. The book made the New York Times bestseller list.

Nasty Gal said it has been looking into “strategic partnerships with other strong brands” and will continue doing so throughout its restructuring process.

The company also said it expected to attract a “new equity partner or sponsor to take the company forward with a healthy balance sheet,” though Nasty Gal emphasized that it plans to emerge from Chapter 11 and continue operations with or without such a partner.

The retailer said that customers and employees shouldn’t see any changes in daily operations and that it plans to ask for early court approval of a plan to “assist in strengthening its relationship with its current vendors and business partners.”

Nasty Gal is facing an increasingly crowded retail landscape, especially with fast-fashion competitors such as Forever 21 and H&M, which can churn out new styles quickly and at cheaper prices, said Paula Rosenblum, co-founder and managing partner at RSR Research.

“Restructuring is always a good thing because it helps you rebalance,” she said. “They need to reinvent themselves a little bit, continue to interest their core audience without losing it and find economies so that it’s a sustainable business model.”

infinity

From Jornal Dia a Dia

The Infinity Judicial Recovery Plan, developed by EXM Partners, begins to generate positive results. Usina Nova Naviraí (formerly Infinity Bio Energy) has just announced the hiring of 40 new employees and intends to employ another 220 until the beginning of 2017, aiming at the next harvest, estimated between 800 thousand and one million tons of sugarcane .

“The case of Usinavi clearly demonstrates the importance of the judicial recovery tool in an uncertain economic scenario such as the one we live in. The plant’s indebtedness exceeded R $ 940 million and investors and creditors interested in the business no longer believed in the viability of the project and in the company’s resumption. Our work was instrumental in rescuing the trust and support of the majority of stakeholders, while at the same time structuring a plan focused on maintaining the activity and the positive outcome of all links in the chain, such as creditors, suppliers, The worker, “analyzes Angelo Guerra Netto, founding partner of EXM Partners. “Certainly, these first signs are more positive for society than a decree of bankruptcy of the company,” he adds. Background – In June of this year, control of the Usinavi plant in Naviraí, Mato Grosso do Sul, formerly carried out by the sugar and ethanol company Infinity Bio-Energy, was divided between Amerra, the American investment fund CarVal and other creditors, as Infinity assets divestiture plan, developed by EXM Partners. At the time, the indebtedness of the plant was R $ 943,478 million and the plant had a processing capacity of 3.4 million tons of sugarcane per crop.

EXM Partners is one of the leading consultancies in the country specializing in Turnaround Management and Judicial Recovery. Founded in 2002, it started its operations with a focus on the SME market, which at the time was not well served by the “Big four”. With the entry into force of the new Brazilian Bankruptcy Law in 2005, a new market was opened for Turnaround Management and Debt Restructuring. The company anticipated this opportunity and was a pioneer in this sector.

Since then, the company has developed more than 400 projects in various practices, conducting more than 80 cases of judicial recovery, with 100% of the plans approved by the creditors. This performance consolidated EXM Partners as a national leader in the number of restructuring and judicial reorganization projects, a benchmark among lenders, legal operators and turnaround industry agents in general. Its focus is to enable the best restructuring solutions for the most complex and challenging cases, in order to meet the legal requirements and, at the same time, ensure the continuity of operations and the socio-economic benefits that come from the business activity. Main services: Turnaround and Corporate Restructuring, Judicial Recovery, Debt Restructuring, Performance Improvement, M&A and Valuation, Audit and Taxes.

oilfield

From NyTimes

(Reuters) – After two years of hunkering down, struggling U.S. oilfield service providers are preparing for an expected oil-price recovery in an unexpected way: filing for bankruptcy.

Companies that drill wells, haul water and provide other services to energy exploration firms have been waiting out a slump in oil prices by idling machinery, laying off workers and extending deadlines for repaying debts.

Now they are turning to Chapter 11 creditor protection to shed debt and raise cash so they can spend and invest again.

Without bankruptcy, many of small and medium-sized service companies risk missing out on any upturn that could follow President-elect Donald Trump’s pro-drilling agenda or OPEC’s plan to cut oil production for the first time in eight years, restructuring advisors said.

“You’ve got some zombie companies out there,” said Jay Krasoff, a managing director with Chiron Financial in Houston. “You have to give counterparties confidence you’ll be in business to do their work. That’s what’s going on.”

Through the end of October, about 70 mostly private energy service companies have filed for Chapter 11 this year, up from 39 in all of 2015, according to Haynes & Boone, a law firm that specializes in energy restructuring.

As the pace of filings accelerates, the size of companies restructuring in bankruptcy is also increasing.

In June through October, nine companies with at least $100 million in debt filed for Chapter 11, with a total of $9 billion in liabilities, according to Haynes & Boone. That exceeded the total for the prior 18 months, which came to $8.2 billion in debt from seven filings with at least $100 million in debt.

In all, energy services companies have restructured about $18.7 billion in bankruptcy. By comparison, the 20 companies in the Dow Jones U.S. Oil Equipment & Services Index have a combined $82.6 billion in debt, according to Thomson Reuters data. (Graphic: http://tmsnrt.rs/2ftVbQ2)

COMPETITIVE ADVANTAGE

The biggest oilfield service providers – such as Halliburton Co and Schlumberger Ltd [SLB.UL] – have the scale to ride out the production glut, despite losing more than 40 percent of their revenue since oil prices peaked in mid-2014.

In a recovery, they can also respond more quickly than smaller companies that spent the past two years hibernating through the downturn, according to restructuring advisers.

Hoping the energy sector has turned a corner, major U.S. producers such as Occidental Petroleum Corp, Chevron Corp, Pioneer Natural Resources Co and ConocoPhillips are preparing to add rigs.

A bankruptcy filing allows a service company to restructure under a court-supervised process in as little as two months. Creditors generally take ownership of the companies in return for forgiving debt, and shareholders generally lose all or nearly all of their investment.

“From a competitive advantage a lot of the service companies had to do that,” said Steven Person, the chief executive officer of exploration company American Standard Energy.

Person has served as an officer and director of energy service companies, including until 2004 at Basic Energy Services Inc, which completes oil and gas wells and transports and disposes of fluids.

Basic Energy filed for Chapter 11 in October with a plan backed by its creditors to convert $825 million in debt to equity and raise more than $100 million in cash. Its confirmation trial is on Friday.

David Johnston, a managing director of AlixPartners, has been advising Basic Energy and said in court papers the company opted to file for bankruptcy in part because competitors were.

“Several of Basic’s competitors have delevered their own balance sheets through Chapter 11 processes, thus forcing even solvent companies to explore similar options to remain competitive,” he said.

Two of Basic’s main competitors, Key Energy Services Inc and C&J Energy Services Inc, filed for bankruptcy in recent months. Key won court approval on Tuesday to cut $1 billion of debt to $250 million and exit bankruptcy and C&J’s confirmation trial is set for Dec. 16.

Seventy Seven Energy Inc, which provides drilling and hydraulic fracturing, or fracking, services, filed for Chapter 11 in June. By early August, the company had cut its debt by $1.1 billion and exited bankruptcy under the control of its creditors.

The company said in its recent quarterly results that it had doubled its rig count in the past six months.

About half of some 32 oilfield service companies still trading actively in major stock exchanges are distressed, including five or six that are severely distressed and likely to restructure, said Kim Brady, a partner and restructuring adviser at financial consultancy Solic Capital.

Restructuring advisers said the stigma previously associated with Chapter 11, which tended to hit companies with serious problems, has vanished, opening the door to more bankruptcy filings.

“Now it’s almost in vogue to be going through Chapter 11,” said Jerrit Coward, former CEO of fracking services provider US Shale Solutions LLC who is now advising energy investors.

petition

From: NYTimes

Is Chapter 11 doomed? There are reasons to think that the famous financial reorganization law won’t work much longer in its current form.

It has already been widely remarked that the tendency for distressed firms to grant first, second and even third liens on their assets makes reorganization all the more difficult. The bankruptcy code was really not intended for a world where everyone is a secured creditor.

For many years, my research has shown that the growth of credit default swaps has made restructuring more complex by making creditors’ true incentives more opaque. Chapter 11, as written in 1978, is based on the assumption that economic interests and legal interests come as a package, but that is no longer true.

Then there are the safe harbors that remove derivatives, repurchase agreements and securities trades from the crucial protections of the bankruptcy code. It was only a matter of time before smart lawyers figured out that lots of ordinary supply contracts look a lot like swaps or other derivatives if viewed from the right angle.

And there is the trend of putting companies’ real estate assets into REITs, or real estate investment trusts. Caesars Entertainment is proposing to put its real estate into a REIT as part of its Chapter 11 plan. But a host of other companies have already made this move or are considering it. REITs benefit from a tax subsidy, provided that they pass on all of their real estate income to shareholders. Separating a firm’s real estate into a distinct corporate entity allows the company to enjoy this subsidy.

From a bankruptcy perspective, this means that if any of these companies ends up in bankruptcy – or in Caesars’ case, if it ends up in bankruptcy again – the operating company will no longer have direct control over the company’s real estate.

This continues the trend of slicing and dicing the company, giving priority claims to select creditors before the company ever thinks about filing for bankruptcy, and sometimes even when bankruptcy is already looming. In either case, the results in bankruptcy are significant, leaving the bankruptcy estate with increasingly narrow options if the company is to survive.

In the 1980s, law professors would talk about corporations as nothing more than a bundle of contracts, but modern corporate finance is making that a reality. The question is whether Chapter 11 works with such a company, especially if some portion of those contracts are “safe harbored” from the operation of the bankruptcy code.