On 5/10/07, David B. Shemano <[EMAIL PROTECTED]> wrote:
I hate to be but pedantic (actually I really like being pedantic), but Accounts Receivable are always relatively easy to appraise, because, by definition, an AR is simply a right to payment of money. That is why the most common type of financing is AR financing. And in turn that is why the most common type of securitiziations are AR securitiziations.
Fair enough. I was just trying to follow along with your terminology.
But Sears is different, because the trademarks are not generating a direct income stream. (They certainly contribute to the cash flow generated by the sale of inventory, but that is different). However, can't you see that the trademarks can be valuated based on the hypthetical possibillity that the marks could (i) generate an income stream for Sears if Sears chose to license the marks to Home Depot, or (ii) generate cash if Sears chose to sell the mark to Home Depot? Yes, it is relatively speculative (all valuations are speculative, but some more than others)..
I certainly admit the hypothetical possibility. In the real world however I see dangerous opportunities for abuse all over the place.
Going back to Sears, you and Michael are further having difficulty because Sears transferred the marks to the subsidiary, but has not yet issued public securities. I doubt very heavily that the transaction was done solely for tax benefits. I have to believe Sears wants to secuitize the transaction.
I guess we will find out eventually. Even if that is their intention, my understanding is this kind of a tax dodge is illegal, so they might have to find a way to dress it up.
If the markets are comfortable with the marks as collateral, the interest rate obtained will be significantly lower. The only way we will know which is correct is if and when the securitization occurs and the bonds are issued.
I am afraid I have far less faith in the wisdom of the capital markets than you do. I'll have to see the post-securitization actions of Sears rather than the bond yields themselves - because to me the bond markets are open to manipulation. -raghu.
