Investing in Sears Holdings’ secured bonds


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For those interested, I have just published in Seeking Alpha an analysis on Sears Holdings’ 2018 2nd lien bonds:

The takeaway is that the bonds are more than fully supported by the asset base of the company: a vast amount of real estate, inventories and receivables and the value of the iconic brands Kenmore and DieHard that I estimate in the base case to be worth more than $5.5bn, enough to cover the first and second lien debt.

The bonds have one year to maturity and they currently trade at around 13% yield to worst. In terms of duration and yield I think they offer a solid risk/reward vs. the high yield space. For instance, many ‘frackers’ pay for 5-year notes less than 6%, debt that should trade at distress levels in my opinion (but you know, yours is truly a bear on US frackers, but never mind).

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