Cramer on BloggingStocks: Red Roof's shoddy deal

Posted Jun 24th 2009 10:00AM by Jim Cramer
Filed under: Deals, Market Matters, Citigroup Inc. (C), Cramer on BloggingStocks

From TheStreet.com Network

TheStreet.com's Jim Cramer wants to out the bankers behind the Red Roof deal and other deals like it.

What didn't they take private? What didn't they lever up? When I read about Extended Stay's bankruptcy and Red Roof's default Tuesday night I started thinking, did anyone besides me ever stay at places like this? Did anyone ever realize the marginality of these places? Did they simply look at some numbers on some pieces of paper and say, "Yep, that's money in the bank"?

And sure enough, Citigroup (NYSE: C) (Cramer's Take) was the lender to Red Roof, a deal two years old that has already gone sour. Maybe this was one of those have-to-keep-dancing-until-the-music-stops deals by Chuck Prince, the foremost clown of all of the bankers of the era.

Red Roof reminds me of the failed deal for Harmon, another totally marginal company that the bankers tried to lever up in the end. I mean, seriously, who decided these things? Did anyone even think about them? Did they just say "It's a stock, let's take it private?" What can be more dicey than a third-rate hotel chain? How about a discretionary provider of high-end speakers to automobile manufacturers?

I am sure that there are people out there who did the Red Roof deal and made a ton of money and are willing to explain to you exactly why they did it and how good it was and who could have ever foreseen what happened.

I know the answer: Most of us could. The Red Roof guys are lucky, though. No one could have done a worse deal than Tribune so there's a benchmark not exceeded. I do wish, however, that we could out the bankers behind all of these deals because there's no excuse for this kind of shoddy dealmaking, and large fees are not an excuse.

Random musings: More on a housing bottom -- we got huge volume numbers out of Florida Tuesday and a slight rise in the median home price. I know that people are fixed on the aggregate but Florida, Nevada, Arizona and California all have had explosion of sales year over year and stable pricing month to month to month, which I am, again, saying is the bottom. Even last night again, someone asked me about my house price appreciation call. There is no house price appreciation. Just stabilization, that's all. ... Citigroup's new salaries? I say that given the taxpayer owns 34% of this one, we need someone running that compensation committee who has the interests of the new shareholders at heart before we have these new salaries. They didn't have such a hot year.

Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.

Tags: c, citigroup, featured, jim cramer, JimCramer, red roof, RedRoof

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Reader Comments (Page 1 of 1)

6-24-2009 @ 11:48AM

rich said...

PEOPLE WAKE UP AMERICA IS FAR FROM OUT OF THE WOODS. STAND ALONGSIDE THIS GREAT COUNTRY AND RESTORE HER BACK TO HER GREATNESS.

6-24-2009 @ 1:54PM

Kevin said...

rich said...PEOPLE WAKE UP AMERICA IS FAR FROM OUT OF THE WOODS. STAND ALONGSIDE THIS GREAT COUNTRY AND RESTORE HER BACK TO HER GREATNESS

Exactly!, first thing is to remove The current admin.

6-24-2009 @ 1:04PM

Tuddy said...

Jim Cramer is an untrustworthy individual.

6-24-2009 @ 1:33PM

paul s said...

Red Roof is the beginning of the bad news that is about to befall the commercial RE mortgage market. Major re-sets are due this summer. Florida has always been home to real estate booms and busts since my yankee forbears started wintering there a century ago. Speculators are as common as the bugs and alligators. To use that states swampy numbers as a forecasting tool... you got a car you want to sell us too?

6-24-2009 @ 3:39PM

Alan Hills said...

Hello, is this Red Roof? Who? Red Roof. Who? Red Roof! Who?
RED ROOF, ROOF ROOF!!!!! You'll have to talk louder, there's a dog barking.

6-24-2009 @ 3:53PM

michael murphy voorhees nj said...

jim cramer is wrong again there is no bottom to this real estate market yet !!! stick with what you think you know i told you down 8000 last year and you were buyll ya ya buy buybuy jim you never meet a stock you didnt like . im a real esate broker and i know a little more about this market then you ! first the maket sitll has a lot of forclosure inventory that will be put he the market. i know for a fact that the banks are holing off millions of homes because i do bank bpos and they aare not puttting the homes the market the banks are holding back on millions of homes in forclosure the banks stopped puting the homes on the market the banks donot want to depress the market futher 2 the intrest rates cant go any lower at 5% no one is buying at 5% what makes you think at 7% by next spring that rate will bring out the buyers and stop the market decline? the buyer will be not be back untill these problems are solved another problem is federal goverment flooding the money suppy with money hyper inflations is just around the corner the chnise are not buying our bonds so we are prinitng money. more money more inflation 3 the commercial mortgage mess is immenent weaking the banks balance sheets. the commerical mess will dwarf the residental mess. 4 we have not even felt the effect of the gm , crysler and thousands of large to mid sized capped companys that are going into chaper 11. more unemployment unemployment is now at 9.4 going to 11 percent mr .bull ya no jobs no mortgages regardless of the price of the home or intrest rates. as far as the stock market goes ie the biggest casino in the world dow 6000 by x mas so sell sell sell into this false rally bull ya jim keep losing millions for your cleints 401k.please stay out of the real estate market were you know nothing about love ya michael e murphy remax

6-24-2009 @ 4:23PM

Dan said...

Because of a lethal combination of soaring vacancies... declining property values... and an inability to refinance - commercial property owners are in deep, deep trouble.

And with a commercial real estate market currently valued at more than $6.5 trillion - it's easy to see why the U.S. Government is highly motivated to prevent a collapse.

A collapse of the commercial real estate market would serve as a final "death" blow to the nation's banking system (which has nearly $2 trillion worth of exposure)... crash the U.S. stock market... and effectively cripple the operating capacity of the Obama administration.

They've done a fair job of holding things together for the moment... but that's about to all come crashing down in a huge way.

6-24-2009 @ 4:40PM

mrdick said...

Jim Cramer? before you listen to him, check out deepcapturedotcom! the commercial real estate debacle is next and its gonna make the earlier crunch look like a swatted fly! by some non perishables and silver folks!

6-27-2009 @ 8:06PM

Jime Cramer is a bald dick sucking crook said...

Cramer is so full of shit he has to wipe his mouth after he takes a dump. This assclown was owned by sissy boy John Stewart who himself is a hypocrite and a douche.