Business reporter Michael de la Merced has apparently been released from his extensive public-service journalism responsibilities on the Kenneth Griffin divorce beat for long enough to write a ridiculous article smearing Sears Holdings for an announcement that sent the company's stock soaring 31% on Friday.
Wrote Mr. de la Merced in the Times:
On Friday, the struggling retailer unveiled yet another unusual financial maneuver that it may employ: selling some of its stores to a new real estate investment trust...
The maneuver also highlights the company's dwindling range of potential financing options. ... sale-leaseback, as the contemplated maneuver is known, would be the most drastic bit of financial engineering yet. ...Though selling the stores to the REIT would generate much-needed cash and assuage any vendors nervous about being paid, the move would also saddle Sears with lease payments and yet another financial burden.
Removing assets from Sears itself could also impair the retailer's ability to take out additional financing in the future.
And the ultimate benefit for shareholders is not entirely clear, since they must finance the creation of any such investment trust and therefore would have to pay for the purchase of the department stores.
So when Sears Holdings is considering doing a sale-leaseback, the Times describes it as "unusual" and a "drastic bit of financial engineering," with no clear benefit to shareholders. Funny, when it was the New York Times Company, five years ago, that raised $225 million through a sale and leaseback of part of its headquarters building, the newspaper didn't mention anything about it being drastic, and it didn't do any fretting about the lack of clear benefits to shareholders or saddling the Times company with "yet another financial burden." You can go read the article the Times wrote in 2009 about the Times Company's own sale leaseback here and compare it to the coverage of the Sears Holdings announcement. Also in 2009, the Times wrote a real estate trend story about sale-leasebacks. Far from describing the transactions as "unusual," the 2009 trend story reported that there had been $15 billion worth of such deals in 2007, and that "an increasing number of corporations — especially those whose bond ratings are less than investment grade — are clamoring to divest themselves of their real estate through sale-leasebacks." The 2009 article named ATT, HSBC, Deutsche Bank, and the New York Times Company as among the firms that have engaged in the transactions.
The Times may want to consider running a correction explaining that the transaction would be neither "unusual" nor "drastic," and it may want to consider avoiding those sorts of alarmist adjectives in the future in favor of reporting the news in a more straightforward manner.
Disclosure: I own some Sears Holdings shares and know and like some of the directors. I have not discussed this with them.