Let's Play the Sears, K-Mart Merger

[adios]

Saw yesterday both stocks were up on the announcement. However, Sears bonds tanked and the rating agencies more or less stated that the Sears bonds would be downgraded to junk status. In the Credit Markets column in today's WSJ the info on the bonds is discussed. All kinds of coverage on the equity side in the WSJ as well. Buy the Sears bonds, sell the stock short?

[Ray Zee]

you have two poorly run companies that need to go bankrupt. without a new vision i think they will but it may take many years of course. neither one has any redeeming values. sears has at least some products with a long time following. but they have let the quality of that stuff fall drastically. like their tools and machines.

[adios]

I agree basically. In a nutshell I see this company muddling along profits wise at best and having the potential to survive for quite some time having the ability to pay the bond holders. Thus, in the long run, I don't see a lot of upside for the equity. Take my preceeding analysis with a "grain of salt" for sure.

[lu_hawk]

The bonds that I've seen are still trading around par. If you did a short the stock/buy the bonds trade you would have to do it with a lot more bonds than stock. Or else you would just be shorting the stock and hedging it slightly with the bonds.

[icetonez]

Trying to go after Wal Mart and Target? Good luck with that.

[tek]

To play this merger, you simply wait until they new company goes under and has a big clearance sale like Montgomery Wards did a few years back.