Blog/News

Performance Sports Group Ltd. Enters Chapter 11

Sadie Keljikian, Top Billion Finance

Performance Sports Group Ltd. has filed for bankruptcy protection in the US and Canada. The company announced that it was facilitating a restructuring and sale of nearly all of its assets on Monday morning.

Performance, maker of Bauer ice hockey gear, announced that it would auction its assets to reconcile its debt. The announcement, however, came after Performance had a deal to sell a majority of its assets to Brookfield Asset Management for just over $575 million. Brookfield, an investor group, is led by Sagard Capital and Fairfax Financial Holdings Ltd. Former Chairman of Performance Graeme Roustan said in August that he was working with investment banks to find a bid. On Friday, Reuters clarified by reporting that Performance would enter bankruptcy protection with a buyer in hand and would seek out higher bids.

It is important to note that Performance’s difficulties demonstrate a wider national trend. Recently, increased competition in North American sporting goods manufacturing presents numerous challenges to all domestically based members of the industry. Due to the industry’s recent turmoil, Sports Authority Holdings Inc. have taken some financial hits in recent months as well. The retailer filed for bankruptcy in March, triggering a $90 million loss of Performance Sports inventory, according to Wall Street Journal.

Performance listed both its assets and liabilities in the range of $500 million to $1 billion. The company listed both amounts in its voluntary petition filed under Chapter 11 in Delaware.

Despite the numerous complexities of this case, Performance claims that operations will continue as usual during the bankruptcy process. Brookfield and existing lenders will provide $386 million debtor-in-possession financing. Performance also announced management changes, President Amir Rosenthal and Executive Vice President Todd Harmon left on Friday. Furthermore, Dan Sills was named executive vice president of hockey, Mike Thorne is now executive vice president of baseball and softball, and Jennifer Hughey was named senior vice president in charge of supply chain management.

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Sears/Kmart Fights Rumors Amid Financial Difficulty

Sadie Keljikian, Top Billion Finance

Sears and Kmart’s financial position continues to weaken and they may not have the resources to recover.

Traditional department stores have suffered an underwhelming year. Analysts attribute the decline to an uptick in onlinepexels-photo-210892 shopping and a decrease in foot traffic at stores. In the eleven years since Kmart merged with Sears, sales have dropped from $37 billion to $10 billion in the same period. In August, Sears announced that its cash and equivalents had fallen from $1.8 billion to $276 million since last year. They are also behind in pension contributions, having accrued a total of $2.1 billion in unfunded pension and post-retirement obligations. This, combined with the company’s total long term debt of $3.4 billion, leaves Sears/Kmart with little recourse. Analysts suggest unloading real estate and other assets to counteract the massive debt.

As financial difficulties facing the company grew, Sears and Kmart received $300 million in financing from Sears CEO Eddie Lampert’s hedge fund, ESL Investments. In addition to the massive number of store closures, Lampert has been consistently shrinking operations and unloading assets in general. CNBC claimed in September that the company’s massive amount of real estate can function as “levers to pull to avoid bankruptcy.” Moody’s analysts as well as several other sources, however, are less optimistic.

Concerns for the Sears and Kmart’s future have mounted recently, as rumors have circulated questioning the company’s bill-paying habits. Last week, The Wall Street Journal reported Jakks CEO Stephen Berman’s comments indicating that the manufacturer halted shipments to a “major U.S. customer that is experiencing challenges.”

Anonymous sources indicated to Wall Street Journal that the retailer in question was Kmart.

Sears CFO Jason Hollar has denied these claims, saying Sears/Kmart has “always paid our vendors for orders we have placed and as part of the normal negotiations between retailers and vendors.” Hollar qualified that there are “occasionally disputes over prices, allocations of product and other terms through the course of negotiations.”

Hollar’s comments haven’t swayed analysts, who fear that Kmart’s days may be numbered.

In response to growing suspicions that the chain won’t last too long, Lampert wrote “Recent reports have suggested that Kmart will cease its operations. I can tell you that there are no plans and there have never been any plans to close the Kmart format. To report or suggest otherwise is irresponsible and is likely intended to do harm to our company to the benefit of those who seek to gain advantage from posting these inaccurate reports.” Whatever the truth behind these rumors, Sears/Kmart is struggling to retain its former reputation as a staple of retail commerce.

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Lack of Insurance adds to Hanjin’s Woes

Sadie Keljikian, Top Billion Finance

The latest issue in the Hanjin Shipping bankruptcy scandal surrounds a lack of insurance on chassis in the US.

Chassis provider Flexi-Van Leasing has requested assistance from a federal judge to cancel all its per-diem leasing agreements with Hanjin. Flexi fears that Hanjin will send “thousands” of chassis onto US highways without proper insurance coverage.

Ever since Hanjin’s filing for protection in a Korean bankruptcy court on August 31st, significant controversy has surrounded the fate of goods, containers, and ships under the Korean shipper’s jurisdiction. Formerly the seventh-largest container shipping company in the world, Hanjin’s losses dramatically affected the international shipping and trade industries.

Flexi-Van Leasing, a New Jersey-based provider filed the motion in US District Bankruptcy Court. The claim is that Hanjin’s insurance ceased on October 10th when the shipper failed to pay its premium. Flexi-Van says that when Hanjin failed to pay its premium, thousands of uninsured chassis in Hanjin’s possession. Hanjin has suspended all deliveries except to ports, but can resume deliveries at any time, according to Flexi-Van’s filing.

The current state of affairs relating to Hanjin is concerning US creditors and customers, understandably, but the Newark court is attempting to resolve some of them. Hanjin is seeking Chapter 15 status in the US, which would allow the shipper to move forward with bankruptcy domestically.

Although the court has yet to rule on Hanjin’s Chapter 15 status, it has on many of the other issues surrounding the shipper’s recent difficulties. Keeping up has proven a challenge as the court addresses dozens of attorneys working for numerous involved parties. Cargo owners, container companies, logistics providers and terminals are just some of those approaching the court for assistance.

In the last month, the court has already determined next steps for Hanjin and its customers. The court has instructed shippers in securing release of their cargo, told Hanjin what to do in order to deliver goods to their destinations, and decided what happens to the containers and chassis after the goods have been delivered. Customers of Hanjin continue to raise issues, mostly relating to damages incurred and payments made to Hanjin.

Flexi-Van claims that Hanjin owes them $3 million for services provided prior to the bankruptcy filing and held several contracts with the shipper, all requiring insurance coverage. Flexi-Van has requested a termination of their agreements with Hanjin, as well as payment for their insurance premium. In theory, this will allow delivery of all goods to move forward as originally planned.

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Blockchain Changes the Game

Sadie Keljikian, Top Billion Finance

The Top Billion Finance world is all abuzz about blockchain technology, which sources claim will change the industry for the better.

Blockchain, a variety of digitized ledger system originally established for Bitcoin, provides a new, simplified way of verifying and monitoring transactions. All pertinent parties can access and update data entries and must approve each transaction. Then, the system encrypts each transaction into a “block,” or digital code. The software then backs up information from each block in a short code or “hash,” and attaches it to the subsequent block. The backup hash makes any tampering with the ledger immediately evident.

A system to encrypt transactions could be incredibly useful in trade business-1676138_1920finance because of its implications for securing supply chains. Manufacturers have recently struggled with supply chain transparency. This is largely due to the fact that consumers have become more concerned with where their money goes. There is potential for dubious practices in any supply chain, but certain goods are difficult to monitor. Among these are conflict minerals, which are one of the recent concerns among consumers.

The tin, tantalum, tungsten and gold industries have recently fallen into the hands of rebel warlords. The resulting turmoil is painfully reminiscent of the diamond mines in Sierra Leone. Given the option, many consumers prefer to purchase ethically manufactured products. Blockchain allows for transparency, even in cases of complex, multinational supply chains.

With a blockchain system, the details of every single transaction are both accounted for and secure. This means that all materials, labor, and shipping costs can be ascertained through a transparent, secure tracking mechanism. Consumers who seek to avoid the products for ethical reasons will have the tools to make more informed buying decisions. Mineral purchases are listed with a “stamp” indicating origin of the mine or smelter, making background checks throughout the supply chain far simpler. Among the obvious benefits, consumers and retailers will be better able to reward producers who supervise their processes and products thoroughly. In short, the promise of more transparency and security offers the hope that consumers can make more informed decisions. Presumably, the public availability of supply chain details will make it harder for unscrupulous businesses to continue operating in obscurity.

From the perspective of the manufacturer, the effects of blockchain technology are a mixed bag. A system for tracking transactions reduces the cost of due diligence when sourcing suppliers. As a result, manufacturers, wholesalers and retailers can make more educated decisions overall. Manufacturers can also use blockchain to investigate pricing in less familiar areas of their supply chain, allowing them to negotiate better terms. This is good news for the manufacturer and, potentially, bad news for suppliers of raw materials. Suppliers may struggle to adjust prices as needed, since they will be in more direct competition with others.

On the other hand, manufacturers may not be comfortable with the public nature of blockchain systems. Although the system is secure insofar as it cannot be tampered with, the ledger is publicly available, meaning discretion will no longer be an option. The system is also fairly new, so there are not yet enough test cases to get a thorough sense of what difference it will make. For those who prize transparency above all else, blockchain seems to offer a panacea to the opacity necessary for complex, multinational supply chains. Transactional efficiency is another major advantage.

In short, blockchain technology offers a promising solution to problems with ledger accuracy and supply chain transparency. Advocates say the system will be instrumental in streamlining and modernizing international trade and finance. Only time will tell if the system will live up to expectations in practice.

 

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Hurricane Matthew & Impacts to Port Operations

As Hurricane Matthew moves up the coast, port operations along the Southeastern US Coastline may be impacted.

Florida: Port Readiness Condition Zulu has been issued by the US Coast Guard (USCG) for South Florida ports. These restriction conditions are in effect for Port Everglades, Miami, Miami River, Palm Beach, Canaveral, Key West, and all other South Florida terminals and facilities.  Under this condition, all vessel movement will be ceased along with all ship-to-shore operations.

Georgia: Port of Brunswick terminals are closed to all work activities until Monday (October 10). Port of Savannah terminals will be closed to truck traffic on Friday (October 7) and Saturday (October 8).  Click here for further updates from the Georgia Ports Authority.

South Carolina: After preemptively deciding to close operations, Port of Charleston has decided to resume normal operating hours at all terminals on Thursday (October 6) for the Wando Welch and North Charleston Terminals. To stay up-to-date on Port of Charleston operations, click here.

North Carolina: Current operating status remains unchanged and the Ports will continue to operate under normal business hours.

Vessels In-Transit are already rerouting to avoid the storm, which may delay cargo arrival for shipments to/from the US East Coast.

Your Top Billion Finance, Inc. representative will keep you informed of the status of your cargo and of the impact the storm will have on ETC operations.

Flight Reductions at Hong Kong International

Due to the implementation of Hong Kong’s new Air Traffic Management System (ATMS), airlines have been asked by the Civil Aviation Department (CAD) to reduce their passenger flight schedules by 10% (2,672 passenger flights) during the period from October 30 to November 26, 2016.

The Phased Functional Implementation (PFI) of the ATMS began on June 19th and the CAD hopes that this four-week temporary reduction during November will make for a smooth and successful implementation.

November is traditionally peak season for cargo transport by air, and the impact of passenger flight reduction on the air cargo industry will be significant in terms of increasing demand and shrinking capacity. Regulators have said that cargo flights are not being asked to reduce their schedules because of the peak season.

In all, 25 air carriers will be affected. Thousands of tons of cargo is expected to be impacted notably between Hong Kong and the airports at Taipei, Shanghai, Bangkok and Manila.

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