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Strategies & Market Trends : Value Investing
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To: Don Earl who wrote (13870)2/5/2002 10:42:27 AM
From: Bob Rudd   of 78744
 
<<Where leases start looking like debt is a situation like SCNT where they have to either pay for space they are unable to utilize or negotiate some kind of a settlement to cancel the lease.>>Cancellation of leases was cited as a primary motivation for the KMART bankruptcy...they had 250 or so LT leases on already closed stores and other stores with lease obligations they wanted to close. Only thru bankruptcy would they get out from under those obligations. With The GAP suffering hard times, I see similarities. A retrenchment by closing underperforming stores would leave them with lease obligations. Since the Operating lease obligations listed in 2000 K of $5.4 B were 41% of EV without lease inclusion [$13.26 B], and since lease obligations, like debt can usually only be avoided thru bankruptcy, the case of doing some sort of lease adjusted supplementary multiple looks strong.
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