Bluestem Group Inc (EM) (BGRP)

BGRPQ changed back to BGRP. "Revised. Issuer Not in Bankruptcy Proceeding. Symbol Reverting back to BGRP."

https://otce.finra.org/otce/dailyList?viewType=Symbol%2FName%20Changes

The "Q" has been removed as of TODAY 3/10/2020. BGRP is no longer in BK

BGRP changed to BGRPQ, bankruptcy. ***PPS closed at .22, up 10%.

https://otce.finra.org/otce/dailyList?viewType=Symbol%2FName%20Changes

Yes, from afar..

Happen to run across a little article about retail companies that are in danger of bankruptcy. Bluestem was mentioned..

https://www.finance101.com/bankruptcy/27/

Anyone following this?? Why is it up 12% today? Any insights or news would be appreciated!

I think long-term I kind of view this as a grow-topline-with-GDP kind of company.

Over the next couple years though there should be some things management can do to hit mid-single-digit growth
- Add categories to the Bluestem platform
- Increase private label penetration
- Grow out the employer-based credit product

Additionally there are some reasonable bottom-line opportunities I know management is focused on:
- The usual merger synergies (rationalize management, back-office, working capital, distribution networks, renegotiate contracts to reflect scale, etc.)
- Increase drop-ship share
- Leverage Orchard sourcing infrastructure for BGRP private label
- There's other Orchard opportunities they're being coy on...

So I'd say modest revenue growth over next couple years, combined with margin improvement

I'd look to credit partner agreements as main risk to that outlook

Sorry, although I know who you are referring to, that's not me.

Is there any reasonable chance for long-term growth for BGRP?

Are you from ST&B?

Oh, and forgot - most importantly

Confirmed $75M CRE at parent company. (The $53M number from the last conf call had weirdly netted the warrant liability against the CRE NAV)

Confirmed almost all the b/s cash is "excess"

Some notes from the investor meeting in no particular order:

Uplisting

Uplisting / going public is clearly going to happen at some point in the future. Management wants to clean some things up as prerequisites:
-Add funding sources for Fingerhut (besides SCUSA)
-Improve credit performance (good trends already in place, should stabilize in 2016)
-Integrate Orchard
-Have an anniversary of Orchard acquisition plus a couple quarters to show a full year of clean financials

Bottom line: these activities push an uplisting to early 2017 (at the earliest)

Buyback

Management was very clear that they believed the stock price was very cheap. To the point that they (sort of) endorsed someone's back-of-the-envelope EV/EBITDA and said the multiple was much too low.

As a guiding principle, they prefer to reinvest in the business. The chairman read a statement, to paraphrase: "But the dislocation in the stock is such that when the board convenes in January, we will consider a buyback."

Orchard sales

Orchard sales down ~5% YoY.

Lots of initiatives to improve profitability at Orchard. No strong view on sales trajectory – it may attenuate a little before reaching 'steady state' according to CEO. But this was in their buy case. "I don't know exactly how sales will trend. What I do know is that profitability is going to get a lot better."

4Q

Management said 4Q coming in a little soft. By "soft" they meant, not at double-digit growth. "Mid to low single-digit growth" over Q4 2014. Part of this was due to advertising campaigns having already been felt, part is tighter underwriting of credit risks, part is softness that management feels retailers are feeling in general.

Credit agreements

Management actively pursuing additional funding sources. Could look like the SCUSA agreement (selling receivables) or another model (e.g., securitization with a partner). Goal is purely to diversify - we won't necessarily see better economics from new agreements. Management views economics of the current agreement as pretty good.

Risk-adjusted margin for their SCUSA is at 330bp, which is below the buffer of 500 bp that the SCUSA agreement calls for. This means BGRP has to sell receivables at a 200bp discount. This will hit earnings – essentially 200bp x Fingerhut sales – but management said the discount won't be in force for the full year. So somewhere less than 2%.

Reason for the performance: regulation putting a crimp on late fees (impact already felt) plus charge-offs.

Synergies

We got some better color on synergies.

$3M cost synergies already taken out, they'll be reflected in results for FY2016. Management didn't pin down a number for other G&A synergies, but someone tossed out a ballpark of $10M and management endorsed it as approximately correct.

In terms of production costs – I asked about impact of bringing Orchard PL products over to the Fingerhut platform, and using the Orchard sourcing network to get current Fingerhut private label items for less. Management put the impact at 1,000 bp for the relevant items – which translates to a "50 – 100 plus bp" impact on sales overall. They'll be ready to make the full transition later in 2016, so full impact won't be felt for a while.

First glance looks like decent performance.

$30M AEBITDA and $22M FCF, but of course that includes what looks like $6.4M of CRE income.

When looking at the strong NI number, it is important to keep in mind that it includes $14M negative expense from 'gain on company's derivatives' - essentially marking their warrant liability down as the stock price got hit.

Some surprises, to me at least. Strong topline at Bluestem and Orchard. I was projecting $425-$450M, came in at $475.

Also, looks like there was more net CRE on the books than I thought. The presser states there is $74.9M, vs. what I thought was $53M at the last conference call (but it was a bit muffled). I'll try to clarify.

Additionally, I believe I was being conservative on working capital and that most of the $164M cash is at the holdco.

Margins a bit weaker than I projected. Looks like main contributor is retail interest from $8.7M to $13.9M, plus integration costs. Retail interest may be due to full Q of Orchard – I will verify. Integration costs I'm less worried about b/c if management is competent those ought to be translating into run-rate cost reductions to e.g. G&A.

All in all looks like things on track. Financials still a bit muddy but we should start to see the FCF generation shine through, especially in Q4.

Bluestem posts 3Q earnings

http://www.bluestem.com/wp-content/uploads/2015/12/Bluestem-Group-Q3-2015-Earnings-Press-Release.pdf

Bluestem Group Inc. Announces Unaudited
Consolidated Third Quarter 2015 Earnings Results
Eden Prairie, MN – December 15, 2015 – Bluestem Group Inc. (OTCMKTS: BGRP) today reported
unaudited consolidated financial results that include its wholly-owned subsidiary, Bluestem Brands, Inc.
and its subsidiaries (“Bluestem”), for the 13-week period ended October 30, 2015 (we refer to the 13-
week periods ended October 30, 2015 and October 31, 2014 in this release as respectively the “third
quarter” of fiscal 2015 and fiscal 2014). Bluestem is a multi-brand, online retailer of a broad selection of
name-brand and private label general merchandise serving low- to middle-income consumers
nationwide.
“Bluestem Group delivered another strong quarter. Net retail sales, including sales from the Orchard
portfolio which was acquired on July 10th of 2015, were $475.0 million, and adjusted EBITDA was $30.9
million. Although net principal losses for the quarter were 130 bps higher than last year, the year-overyear
increase continues to narrow. On the Orchard front, we are making good progress on the
integration; we’re already cross-selling merchandise, we’ve consolidated and renegotiated several
meaningful contracts, and we’ve centralized the appropriate back-office and operations functions in
order to streamline both companies and drive the benefits anticipated in our acquisition model,” said
Steve Nave, Bluestem Group’s Chief Executive Officer.
Third Quarter 2015 Bluestem Group Consolidated Highlights – Includes Bluestem Brands beginning
November 7, 2014, and Orchard Brands beginning July 10, 2015
? Adjusted EBITDA for the third quarter of fiscal 2015 was $30.9 million compared to $8.3 million in
the third quarter of fiscal 2014.
? Net income from continuing operations for the third quarter of fiscal 2015 was $11.2 million
compared to net income from continuing operations of $5.4 million for the third quarter of fiscal
2014. Diluted loss per share from continuing operations was $0.02 for the third quarter of fiscal
2015, compared to diluted earnings per share from continuing operations of $0.06 for the third
quarter of fiscal 2014. Included in the third quarter net income was a $14.1 million non-cash gain
from derivatives in our own equity.
? Net gain on loans held for sale, investments available-for-sale, and equity in income of joint
ventures and partnership was $2.3 million in third quarter of fiscal 2015, which included net
gains of $0.7 million on proceeds of $5.9 million from dispositions of $5.2 million in net assets.
As of the end of the third quarter, the company had $74.9 million in net commercial real estate
assets remaining.
? Cash and cash equivalents were $164.9 million as of October 30, 2015.
1
Third Quarter 2015 Bluestem Brands Stand-alone Highlights – Includes Orchard Brands beginning July
10, 2015
? Net sales for the third quarter of fiscal 2015 were $475.0 million, including $234.3 million of net
sales from the Orchard Portfolio, a 123% increase over net sales of $213.3 million for the third
quarter of fiscal 2014.
? Bluestem’s adjusted EBITDA was $27.0 million in the third quarter of fiscal 2015 compared to
adjusted EBITDA of $11.5 million for the third quarter of fiscal 2014.
? Bluestem Legacy Portfolio net sales for the third quarter of fiscal 2015 were $240.7 million, a 13%
increase compared to $213.3 million in the third quarter of fiscal 2014.
? Orchard Portfolio net sales for the third quarter of fiscal 2015 were $234.3 million, a 5% decrease
compared to Orchard’s net sales of $247.8 million for the 13 weeks ended October 25, 2014.
? Fingerhut and Gettington revolving new customer credit accounts were 169 thousand, an 11%
increase over 152 thousand in the third quarter of fiscal 2014.
? FreshStart new customer credit accounts were 55 thousand, an 8% increase over 51 thousand in the
third quarter of fiscal 2014.
? Fingerhut and Gettington active accounts increased to 1.69 million as of the end of the third quarter
of fiscal 2015, a 10% increase over the end of the third quarter of fiscal 2014.
? 30+ day delinquent balances on the revolving portfolio were 17.6% at the end of the third quarter of
fiscal 2015 compared to 17.8% for the same period in 2014.
? Net principal charge-off rate on the revolving portfolio was 18.8% for the third quarter of fiscal 2015
compared to 17.5% for the third quarter of 2014.
? Orchard Portfolio active customers were 8.0 million as of the end of the third quarter of fiscal 2015.
? Orchard’s active customers were 7.9 million as of September 27, 2014.
All financial information included in this release is unaudited. Information for Bluestem Group is
presented on a consolidated basis, including Bluestem Brands Inc., beginning November 7, 2014 and the
Orchard Portfolio beginning July 10, 2015. Consolidated information for Bluestem Group’s whollyowned
subsidiary, Bluestem Brands Inc., is also presented on a stand-alone basis. The acquisitions of
Bluestem Brands and Orchard were accounted for as business combinations.
Adjusted EBITDA is defined in the accompanying financial information of Bluestem Group and Bluestem
Brands. Please see “Bluestem Group Inc. and Bluestem Brands, Inc. Financial Information-Overview
and Basis of Presentation” below and accompanying disclosures for a more detailed explanation of the
foregoing matters, reconciliations to results reported under GAAP and other important information for
investors to consider.

Interesting portfolio.

Thanks for bringing this one up, it seems interesting. Have you read through the press release for today?

http://www.bluestem.com/wp-content/uploads/2015/12/Bluestem-Group-Q3-2015-Earnings-Press-Release.pdf

They are showing $22.3MM in FCF on $27MM in adjusted EBITDA. I haven't read through in depth yet though.

All quiet on the board.

The stock continues to trade poorly. I'm adding, as my analysis shows you can buy the operating businesses at 3x earnings or better.

Shall we toss out some numbers?

Market cap today of $408M at a $3 share price

Let's break the business into operating and non-operating pieces.

Non-operating:

Legacy Capmark is down to $53M NAV per the last conference call.

Then there's cash. $163M as of last report. How much can we call excess? Let's call $63M working capital and $100M excess. (This is likely conservative. The SCUSA agreement requires $40M of liquidity, although not sure whether that includes asset-backed revolvers etc. This amount plus $20M looks like enough to run the business)

So for the non-operating business there's $153M of value.

Leaving $255M for the rest: Bluestem and Orchard brands. (We can do this since I believe management kept the debt taken on in these acquisitions recourse to each operating entity. At least they did for Bluestem, I need to double check the $270M term loan for the Orchard acquisition).

What does $255M buy you?

For starters, it's less than the cash (or non-debt) portion of the acquisition price for the two operating assets: $265M for Bluestem ($565M acquisition less $300M term debt taken on) and $104M for Orchard (of the $410M acquisition).

Meaning the market is implying an immediate writedown on these two acquisitions, notwithstanding 1) greater resources and financial flexibility for growth at both companies 2) almost a full year of Bluestem double-digit topline growth 3) synergies between the two companies we should start to see over the next year, and 3) the tax protection the parent company's NOLs bring to the table.

Okay forget history and price paid - what does it buy you today? Last quarter showed $13.8M loss. Let's adjust that for BS I don't care about:
-Subtract AOCI: $0.362M
-Add back amortization of intangibles: $14.76M
-Take out the mark on the warrants: $0.411M
-Take out CRE income and opex (since we already netted CRE out of the market cap: $2,284M
-Add back one-time acquisition expenses: $6.6M

That gets us to a normalized 'cash earnings' of $4.5M for the last quarter. (What I'm calling 'cash earnings' is closest to EBDA)

But wait - Orchard was only in the results for 21 days. If we adjust these earnings for a full quarter of Orchard I get to an estimate of $12M cash earnings for the quarter. Annualizing this is putting us into 19% earnings yield territory (4 x $12M earnings / $255M market value). Not bad.

Of course you can't annualize a retail business. It's hard to say what Q3 and Q4 will look like from an earnings point of view since there are a lot of moving parts from the acquisition. But, we can say what the seasonal pattern of sales looks like, and then use the last quarter as a baseline for expenses.

Bluestem sales seasonality (Q2 = 1)
Q1: .74
Q2: 1
Q3: .93
Q4: 1.98

So Q4 is typically a monster quarter. Plus management is back-loading advertising to Christmas. If Q4 2015 looks like it has in the past, we'd expect to see ~$900M sales in Q4 (assuming Orchard is seasonal similar to Bluestem).

Scaling expenses that scale (COGS, marketing, Bluestem credit expense) and holding constant those that don't scale (G&A, interest) - I estimate between $80M and $95M cash earnings for Q4 (again, with the same adjustments as before like amortization etc.)

Now we can lay out the year
Q1 about breakeven, maybe small loss
Q2 ~$12M
Q3 $5-10M
Q4 $80 - 95M

Which means we're looking at $85 - $115M in cash earnings for 2015.

For a price of $255M. That's a 30-45% earnings yield.

And keep in mind this is before the impact of any synergies from the Bluestem - Orchard tie-up. They've never quantified those but we can imagine there are considerable revenue synergies (e.g., selling Orchard private label on Bluestem's platform) and cost synergies (using Orchard sourcing network for Bluestem private label, returns to scale in G&A, etc.)

(Let's idiot-check this vs. management guidance. At the time of acquisition, they guided to $169M in EBITDA. In the last conference call they stated that they were 'approximately on track' for this number. Subtracting $55M in interest expense puts us at $114M in what I'm calling cash earnings. I'm not sure what management means by 'approximately' but EBITDA 20% lower than guidance still means $80M in cash earnings.)

Risks:
-Credit buying business model may come under regulatory scrutiny as predatory
-Class action lawsuit about Bluestem pricing practices
-Funding risk: only funding agreement for their layaway business is with SCUSA, which is exiting the business. Current agreement nevertheless remains in force through 2020 and they are looking to second-source.
-The usual integration risks etc.
-Poor acquisition. Management is almost certainly shopping for another business and will use balance sheet cash (which is unequivocally not going to be distributed to shareholders) + more debt. I certainly liked the Orchard acquisition a lot less than the Bluestem acquisition. Hopefully #3 does not continue the march down in quality.

http://www.cnbc.com/id/102759561

Capmark Financial Group Inc., CPMK, changed to Bluestem Group Inc., BGRP:

http://otce.finra.org/DLSymbolNameChanges

The conference call can be accessed at (888) 428-9490 or (719) 457-2697 (International). The call will also be broadcast simultaneously at http://www.capmark.com/investor-relations.


Capmark will host a meeting to discuss the acquisition of Orchard Brands at the offices of Akin Gump Strauss Hauer & Feld LLP, One Bryant Park, Bank of America Tower, 43rd Floor, New York City at 12:30 PM ET on Tuesday, June 2, 2015.
CAPMARK.COM

So Bluestem pulls 1$ Billion annually, along with Orchard's Billion.

1+1= $2 Billion


http://www.bluestembrands.com

I think the target audience for both Bluestem and Fingerhut are top consumer groups. Now just make it as fun and easy as possible. This company is shaping up to be a pretty sweet online retail powerhouse.

http://www.sctimes.com/story/money/2015/05/28/bluestem-owner-acquires-orchard-brands/28081363/

than you for invite/ Capmark Financial Gr (CPMK)
5.8 ? 0.15 (2.65%)
Volume: 392,502 @ 4:04:02 PM ET

Bid Ask Day's Range
5.65 5.8 5.65 - 5.85

CPMK Detailed Quote Wiki

Not too shabby

Assets>Liabilities

I like it

http://www.businesswire.com/news/home/20150428006892/en/Capmark-Financial-Group-Announces-Unaudited-Consolidated-Fourth

Another 52 week high! Is that you?

Glta

UpTick

And you as well! This movement of CPMK in the last few months is too timely to be a coincidence ,imvvvvho.

Take Care
David

so 620K shares trade in 1 lump then AH 420 shares trede.
Hmmm- $6,000,000 on a OTC Pink with typical volume super low.
Oh and PPS hardly move?


http://www.nasdaq.com/symbol/cpmk/after-hours

Yes, I hope it is CPMK. My first job many years ago, was in recovery, working Fingerhut paper. My next stop was at a bank, that was acquired by Wamu.. Funny how stuff works out sometimes..

Gltu dmceng

UpTick

That plus other parts of CPMK might be of use to WMIH. In any case, this CPMK is and has been very lethargic for some time and seems to be waiting for some type of action. I like the looks of a merger here, imvvvho.

Take Care
David

Only speculation my friend..


CPMK has Fingerhut and could use some WMIH NOL's in their war chest.

The word on the street and mostly the WMIH board is that it will acquire CPMK in order to start utilizing the NOL that it has close to 4 b and to try and uplist to NASDAQ. That is the short version

Uptick

What buyout?

Take Care
David

Fingerhut!

Now you can!



$CPMK

I think this stock got what it takes to deliver a real breakout move.

B-B-B-B B-B BUY O-O-OUT! Yes, I can!


Glta

Can you say BUY OUT?

New 52W high, what's going on?

Extra 2.2mm shares at close deal is on for sure!!

Capmark is getting set up to be acquired by WMIH and KKR through WMIH. Real soon the news will come. Shorts are covering!
Cheers
Blue

At what point do you see a flood of short covering? Any particular price range?

The Q at the end of a ticker, doesn't stand for Quality. Just thought you should know. Maybe take another look at cpmk..

Don't know, I quit following this POS a long time ago

Hope you got your money back

New 52W high, what's going on?

Pitt, I don't have PM. Thanks for your note though. And I respect your reasoning regarding some of your actions, I'm sure you know what I mean. BTW, no I don't hold CPMK, but thank you for your consideration. I have no opinion of the company one way or the other, I only had it brought to my attention because a poster on another board noticed it's not trading today. Best of luck!

Pittski, Uptick! Hey interesting to see you guys here! I was a holder of GTAT (and will be again in a month or two) and on that board you two had opposite roles than you do on this one. You've switched around the savior versus the grinch, funny to see!

Beats me, I don't waste my time with this POS

Is there any NOL value that CPMK owns as assets

Yes, quite impressive actually

Had a little volume today.

Glta

No problem, happy to help.




Glta