"Under the revamped proposal, which will update the company's previous plan to reorganize around its real-estate holdings, all allowed claims against Syms will be paid in full, "pursuant to certain agreed upon time frames." Allowed trade and other vendor claims against subsidiary Filene's Basement LLC--whose retail operations, like Syms's, were shuttered in the wake of the November bankruptcy filing--will also be paid in full. Holders of allowed unguaranteed lease-rejection claims against Filene's will see a 75% recovery.
Those recoveries could be funded, in part, by a two-step transaction that's the new heart of the creditor-repayment plan. First, Syms will redeem shares owned or controlled by Marcy Syms, the company's majority shareholder, chief executive and daughter of founder Sy Syms, at a price of $2.49 per share. Then, Syms will launch a rights offering, through which it expects to raise $25 million in cash by offering new common stock at the same share price.
The resulting money "will be used to fund Chapter 11 exit costs, working capital for the reorganized company, and to the extent of any excess, toward partial payment for the redemption of shares owned or controlled by Ms. Syms and the payment of Syms creditors in accordance with the plan," Syms said in court papers."
Here is the filing from the court.
This does a few things. First and foremost, it cashes out Marcy Syms and gets her into retirement, which based on previous performance: desirable. Besides, from what I have gathered in the past, with a host of litigation and such, Marcy Syms has been looking for a way to exit for quite sometime. She is a millionaire and can enjoy not fighting anymore. Next, the agreement has the potential to further solidify the control of the company into the hands of the equity committee- they are the big shareholders and are backstopping the offering. Furthermore, the company is only on the hook for 75% of the Filene's leases as well, which is a big money saver... Not to mention that there will be fewer legal fees and the like from the BK ending sooner, rather than later.
It also seems as if all shareholders that are also accredited investors are able to essentially buy Marcy's shares for $2.49/share (or, about $36mm dollars)- a price at which, I would think is pretty cheap, given that the company as a single piece of real estate that is likely worth significantly more:
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While we have yet to see how this plays out, but, I am certainly not upset by the move. Another point is that the equity committee, due to the composition of the various shareholders, is set up in a way (by the BK court) that represents shareholders- again, not a bad thing. All in all, I think that this was necessary to juice the full value out of the real estate that the company has. From what I have read, I am far from unhappy about the move.
EDIT: It is interesting the amount of saber rattling that appears to be taking place. While I personally detest such matters. As such, there is still uncertainty in the matter. I do wonder how much of this matter has been blown out of proportion by various lawyers, who are generally paid to draw things out as long as they can. Regardless, I am still long shares of Syms and will continue to watch the situation with great interest.
Disclosure/Disclaimer: My family investment club is long shares of Syms. We reserve the right to change our positions at any time. This post is my opinion. Always do a ton of your own research before even contemplating anything that I say, do, write, or so much as think about.