So lets see, Eddie has made 1.00 a year salary, plus loaned a lot of his money to SHC to keep it afloat in these tough times. If SHC fails, Which it will not, then Eddie collects pennies on the dollar of the money he generously loaned SHC.
I am confused.
Everyone keeps talking about his stake in the properties as the boondoggle of his investment in Sears and Kmart, but it is incorrect. The real estate is not worth what he envisioned it to be fifteen years ago. It is not worth even a fraction of it. Retail space is no longer valuable, as Brick and Mortar shopping continues to dwindle at breakneck speed. Just look at the value decline in REIT's over the last year.
Eddie will come out ok in this deal, and maybe break even, but it will not be some major investment score for him or his fund. In fact, it is has ruined his reputation as a dealmaker and has sent many early, fawning investors away forever. Eddie saw the real estate as a sure failsafe should the retail turnaround fail to take hold. But the real estate stopped being valuable, so the entire investment strategy has failed spectacularly.
Eddie has SHC real estate as collateral and inventory as collateral on the loan. This means that if SHC goes bankrupt Eddie gets the real estate and any money from the sale of what is left of the inventory.
He will take whatever real estate he has as collateral and sell it to SRG to rent to a higher rent tenant or redevelop it to lease or sell for more money. He also has been collecting interest on the loans which I believe is around 8%, so he is doing just fine. And as the holder of the debt he is first in line to be payed in bankruptcy, before shareholders, vendors, employees etc. For reference see how he bought the debt of KMart and used that money to buy Sears. Smart moves on his part really.
Lastly, he gets paid in options which means he can cash them in at a certain price. So he gets money from SHC stock which he cashes in for cash, but those shares also dilute the share price for everyone else.
As everyone else has pointed out Eddie has made money on every deal he has made. The only reason this company has not been shut down years ago was the real estate crash. Eddie just bid his time until the market came back. Retail is dead but land and property will always be valuable especially when you can get it for pennies on the dollar with interest.
Eddie is a real estate guy, not a retail guy. It has never been about retail but the real estate (once again see KMart). You may not like his methods but you have to respect his business and finance sense.
@1hvp I don't remember Sears on the verge of bankruptcy back then, and I worked for the company then too.
This doesn't seem to be the case. Based on the evidence and his decision making it looked as if he wanted to make a profit on the properties associated with SEARS and KMart but held them too long and the economy crashed which resulted in him having to keep it on life support all of this time. He has never attempted to make SEARS or KMart "better." In fact, he is quoted as saying that he doesn't believe in improving his retail spaces "like other companies do."
I heard that when Lampert bought Sears it was on the verge of BK? I have been with Sear since 1998, store closed in March 2017.
There are a few things missing here. First, remember that Lampert only put about 400 million into Kmart debt and then forced it into bankruptcy so he would take majority ownership. After paying the outstanding debt with the new Kmart stock they had a very nice balance sheet. He used this to talk Alan Lacy of Sears into a backdoor "merge". Instead of investing the 10 billion he then had to revitalize the business, he used it on stock buybacks which reduced and retired the amount of outstanding shares in order to increase his ownership percentage. As has been mentioned, he already spun off Land's End, the Hometown store, Seritage Reit, etc. and has maintained over half the ownership in each. Now he has "lent" money to Sears secured by the best real estate which he will get when they go belly up. As with all lenders, the actual property is always worth considerably more than the loan. In summary, after a relatively moderate initial investment, 15 years later, he will have received billions worth of assets.
1pxu, so how much did he make/lost by milking it? Was it better to sell his holdings after the merger and make billions?
As someone with personal knowledge, the answer is milk it dry.
@1bkk Thats very interesting if he actually had a vision of trying to make a mega store try to take back the throne that it once had back in the old days. I wonder if Eddie actually tried and he just saw that it was just not as easy as he though. Or could it of been that he actually had a plan to just milk what Sears legacy has left. I wouldn't know in my personal experience, but would of loved to know when Eddie took over how Sears was and what he was doing to make it a profitable overall company.
@1lwu Be very interesting to actually read a book after Sears goes under. I mean was this his plan all along? Did he actually try to save this huge corporation and make it it the #1 retail store it was once? Or was it just a way to milk as much as he could.
For people who say that he makes a fortune on Seritage. Congratulations! You can buy Seritage stock for $42 what is down from $56 last year.
I love to read about Eddie making millions on SHC's bankruptcy. The dude lost a decade of his life and lots of money on this deal... He did have a vision but it didn't work out so far.
Some talk about his compensation as CEO and interest on loans. I think this is negligible for him.
Let's be honest he wins big if the company performs well and so far it's not working out. Sears Canada filed bankruptcy yesterday. How exactly did he make money on this?
Many think he had this in mind by coming up with the separate business unit model. That way certain units would be bankruptcy proof.
Idiot OP knows nothing. Seritage and the secured properties alone make him a fortune.
And from day one, Lamchops primary goal was to bleed this company dry..... Where was the capital improvements? Where were a new store concepts, ( besides those disasters of Kmart reconfigured as mini grands.....) All shams while he tranferred money into his other adventures. Remember, he was going to tell people how to shop?
I think sometimes we all forget the other side of the coin. Is Eddie Lampert bleeding the company dry? Yes. Was that his intention from the very start? I don't think so. I think he got into this thinking he could become a retail superstar. I think he messed it up royally and is now doing whatever he can to recover as much financially as he possibly can. Overall he'll come out a loser, but he's going to come out better than the rest of the shareholders, that's for certain.
Eddie lent Sears money on its best real estate with plenty of cushion on loan to value.He is going to lose the last 300M in the stock value and make close to that amount on the repossessed stores he takes and sells
Interest on money loaned to SHLD. (His rates were well above market).
Prinicipal. In July he will receive $100 million of principal for a loan he provided PLUS a $4 million bonus over and above interest for the loan he provided (and additional fees earned).
Fees for lending out shares held. He earns fees for shares he loaned out; and with the ability to call back the loaned out shares at any time also had the ability to force sudden short covering whenever desired.
Compensation for covered puts sold.
Sears cost Eddie a lot
-time spend screwing around with sears when he could be elsewhere actually making profit.
-his reputation is trashed
-the value of his hedge fund is a shadow of what it was.
He's lost a ton just from the hedge fund alone. That's a pretty big deal. The profit he could have made on those billions versus what he made at their actual values.
Also, his stake in sears was apparently worth 3.8 billion at the beginning. That value is now reduced to just under 300 million.
There's no way he will come out positive.
Will he be ruined forever? Absolutely not. I'm sure he'll have plenty of money to live in and plenty of time to make more. But the sears transaction as a whole is definitely gonna be an L in his books.
He is compensated an annual bonus of $4.5 million; payable in shares monthly. the share price used to determine the number of shares awarded is based on the actual share price on a certain date in December, 2016. (Which was about $7.80 and worked out to a bit more than 50,000 shares per month).
This year the company awarded $40 million dollars for lack of fiduciary duty by teh CEO and BOD. Instead of compensating shareholders the award was paid ton the company. The company used the award to pay off debt ... essentially bonds held by Lampert.
Lampert is a "Secured" creditor; putting him near the front of the line for debt payments should the company fail. [IMO: Somewhat ironic given a lawsuit the company filed against a vendor claiming the vendor should be forced to rely solely on letters of credit. They are unlikely to be paid if the company fails.]
As a lender Lampert is likely to be able to use any unpaid debt towards "Credit Bids"; to purchase assets auctioned off at firesale prices versus other bidders required to use "Real Money" to back their bids. A "Credit Bid" is basically monopoly money. Credit Bidders get 100% of the debt they are owed to bid with; but after all assets have been sold any remaining "Credit Bid" money held becomes worthless.
As a 50% plus shareholder Lampert can control every aspect of bankruptcy; even selecting which professionals are used to audit the firm; auction off assets; perform accounting; and the selection of DIP lenders. He will even be able to personally decide which employees are "Key" employees and set the salary for each. Although a bankruptcy judge must affirm the selection; and agree to the "premium" salaries suggested; I've never seen a case where the judge denied the suggested compensations needed to retain key personnel; including the CEO's position. All bankruptcy costs are paid by the estate. (Essentially the shareholders).
Fast Eddie wins whether Sears closes or not - employees & "NORMAL" shareholders lose
Don't forget all of the stores Eddie put in the reit. On July 8th 2017, all of that prime property will become Eddie's. Also remember all that he has spun off: Hometown stores. Kenmore, Diehard, Lands End. All of that will not be part of the bankruptcy. It will be Eddie's. Eddie is going to come out of this with billions. He is only waiting until the properties in the reit become clear on July 8th. Eddie may not come out with all that he wanted, but he will be a much richer man. Let's hope that he never runs another company into the ground, like he has done to sears and kmart. He needs to just stick to real estate.
He won't end making more money than he lost. But he will recuperate some of the money spent for sure. Massive difference people seem not to understand.
Personally I don't blame him for trying to save himself. He would be a complete idiot (or an even more complete idiot depending on who you ask) if he didn't try to do damage control for his own personal wealth in this situation.
OP you gota do some more research.
Eddie Lampert
"Title: CEO, Chairman, Sears Holdings
Salary: $1
Stock, options, other compensation: $4.3 million
Total pay: $4.3 million"
Bonus kicker
"Over the course of the year, he was paid $4,309,542 in stock awards in monthly installments. -E.F."
But theirs more to it as poster below said he is protected by loaning money if the company fails he ends up keeping all those properties for himself.
Its like I lend somone $1,000 if he doesn't pay me my money plus interest I end up keeping the persons belongs by an agreement we both agreed so I dont get burned at all. Its a win for me and a loss for him no matter what.
And he made sure the properties securing his loans are worth more than the loan itself. Oh and he has collected millions of dollars in interest on those loans as well
Every loan he has given. SHC real estate was used as collateral for the loan. So once SHC fails he gets the property.