West Marine Restructures Debt

[Letterkenny]

Originally Posted by jlynker

You're welcome to your opinion but Bain Capital did it to Sports Authority, Bed Bath & Beyond & West Marine & Gibson Guitars is going through it now..

And yes, the Equity Notes & investments of $225M, when WM files bankruptcy will be the largest recipient of the remaining assets. They don't have to "lien hold" in bankruptcy court.

"Where they thought they could..." - I doubt a Venture Capital / Private Equity firm tossing around hundreds of millions is that niave to assume ALL the risk of failure without that plan (I'll call it plan A) being fully flushed.

You kept mentioning public shareholders when that’s factually inaccurate. By going private, you get rid of the shareholders outside of the investors with which whatever fund this acquisition is in. Further, you don’t seem to understand how bankruptcy works. Debtors tend to be first in line, followed by preferred holders, and then common. It’s the way the agreements are structured for the firms to be able to get debt. That’s also why the PE shops are willing to do this as they aren’t taking much risk at all as it’s not their money. It’s just leveraged money from a consortium of lenders.

One thing that you did get partially right is that shops will also look for deals to extract the most amount of cash from as well. This can be by buying an entity, heavily financing it to get returns. If it goes BK then it goes BK but that’s never the main goal. You would make it increasingly difficult to get funding if this was always your strategy. I have worked with a firm that took a large real estate entity private as they saw it undervalued, extracted a ton of capital via debt to get immediate returns, but are still holding it as they can service the debt. They identified a company undervalued and extracted the value while still enabling a sound business.