Monday, November 21, 2011

Provide Your Comments on the New Proposed Fee Guidelines

The United States Trustee Program (USTP) has drafted new proposed guidelines for reviewing applications for professional fee compensation in larger chapter 11 cases (more than $50 million in combined assets and liabilities, aggregated for jointly administered cases).

According to the proposal, among the goals of the guidelines are to ensure bankruptcy professional fees are subject to the same scrutiny and accountability that apply in non-bankruptcy engagements, and to increase disclosure and transparency in billing practices.

The proposed new guidelines feature six key changes:

  1. Electronic Data: Fee applications should be submitted in an open electronic data format

  2. Categories and Tasks: New project categories, as well as activity-based sub-categories, have been added

  3. Verified and Other Statements: Clients should provide verified statements in connection with a fee application to disclose, among other matters, whether the client reviewed fees and compared them to its approved budget

  4. Budgets and Staffing Plans: Budgets and staffing plans will be encouraged

  5. Additional Disclosures: The United States Trustee will seek disclosure of the lowest, highest, and average rates billed for the preceding year for estate-paid bankruptcy work and for all other work combined

  6. Special Fee Review Procedures: The proposed guidelines set forth models and principles for the use of independent fee examiners, fee committees, and fee committees with independent chairs

Read more about all of the objectives as well as additional details about the six key changes. You also can read the entire draft of the proposed guidelines or view the current guidelines that were established in 1996.

The USTP invites public review of and comment on these proposed guidelines by January 31, 2012. I encourage you to submit your comments by e-mail to All comments received will be made available for public inspection at

Wednesday, October 26, 2011

Biz Stone Shares Insight and Lessons Learned from Co-founding Twitter

Biz Stone shared colorful insight and lessons learned from the creation of the $7 billion social networking site during an interesting keynote presentation at the 2011 TMA Annual Convention this morning.

Stone, who prior to co-founding Twitter worked on the very platform that this blog is hosted on (Blogger) at Google, provided an interesting glimpse into how Twitter went from being a means for sharing text messages to playing a central role in organizing political uprisings.

He also shared several stories and lessons learned that inspired and motivated him to co-founding Twitter. For instance, looking for an opportunity to meet new friends and fit in during high school, Biz started a lacrosse team and not only did he enhance his social standing, he went on to excel in the sport. The lesson learned – you can manufacture your own opportunities.

He went on to share additional personal stories and encouraged the turnaround and corporate restructuring professionals in the packed audience to use creativity in their work and to have the willingness to fail spectacularly in order to succeed spectacularly.

Stone ended his presentation by sharing his seven assumptions for business:
  1. We can change the world, build a business and have fun.
  2. We don’t always know what’s going to happen.
  3. There is a creative answer to every problem.
  4. There are more smart people outside our company.
  5. We will win if we always do the right thing for our users/customers.
  6. The only deal worth doing is a win-win deal.
  7. Your co-workers are smart and have good intentions.
Following his presentation, Biz participated in a question and answer session and discussed Twitter’s business model and ways attendees can use the social networking site to enhance the marketing of their firms or clients.

Follow TMA on Twitter to learn about the latest TMA and industry news.

Monday, October 24, 2011

TMA Sets Sail for San Diego

I have arrived in beautiful San Diego to join more than 600 turnaround management, corporate restructuring and distressed investing professionals for this week's 2011 TMA Annual Convention.

I look forward to TMA’s annual event every year, but this year I am particularly excited. Not only because of the great Southern California destination, but because this year’s event promises to be a memorable one due to a number of unique events and new features – including a TMA smartphone app – that have been added to enhance the education and networking offered at the meeting.

Led by co-chairs David McReynolds and Omar Mirza, the 2011 TMA Annual Convention Planning Committee has put together an excellent program.

It all starts on Tuesday afternoon, with a special advanced education session panel on ethics, led by moderator Jack Butler. That evening, the networking gets underway with several receptions leading up to the California Wine Walk in the Exhibit Hall – a unique take on the traditional exhibitor reception.

The Tuesday night receptions conclude with an event I think everyone is eagerly anticipating – the Opening Reception Aboard the USS Midway. A truly unique venue, attendees will not only be able to enjoy a great evening of networking and developing business relationships, they will also have the opportunity to check out an aircraft carrier that was once the largest ship in the world.

Twitter co-founder Biz Stone gets the educational component of the Annual Convention underway with the keynote presentation on Wednesday morning. Biz will share business insight developed through his experience with the $7 billion social networking site and while he was working at Google and as a strategic advisor for several companies and organizations.

Wednesday morning also is the debut of a new education session format. Designed to provide more interaction and idea sharing, five workshops have been added to the schedule and will cover technology turnarounds, forensic accounting and more.

Also included in the agenda for the first time is a session created specifically for young professionals – Rainmaking: Business Development for the Next Generation. An experienced panel will share their knowledge on what it takes to excel in the turnaround management and corporate restructuring profession.

On Wednesday afternoon, Lynn M. LoPucki will instruct attendees on how to use the UCLA-LoPucki Bankruptcy Research Database (BRD) during the Keynote Luncheon. (Thanks to the support of the TMA Cornerstone Board-designated Endowment, TMA members now have access to the BRD free of charge).

These are just some of the many highlights. The convention also features an exhibit hall, a full education schedule and numerous networking opportunities during the meeting and in the evening.

There’s a lot to look forward to this week. I hope to see you in San Diego and if you haven’t registered already, you can still register onsite or online. And if you can’t make it to this year’s TMA Annual Convention, I encourage you to mark your calendars and plan to attend the 2012 convention in Boston, November 1-3.

Monday, August 29, 2011

TMA Adds Interactive Workshops to the Annual Convention

As a way to improve networking and promote interaction among conference attendees, TMA is introducing the workshop concept to the 2011 TMA Annual Convention in San Diego, October 25-27.

While the larger general and concurrent sessions focus on broad topics and consist of presentations by a panel or speaker, the workshop concept was conceived to involve smaller audiences and cover more niche topics. With a goal of 10-25 participants per workshop, the format is designed to promote interaction among the attendees and provide for more give and take than is possible in the larger sessions.

Three workshop topics are being presented at this conference:
  • Social Media – Educates professionals on the use of social media including LinkedIn, Facebook, Twitter and other networking tools. Speakers consist of both a social media and communications consultant.
  • Technology Company Workouts – Focuses on the unique aspects of technology companies and the complexities of workouts where intellectual property rather than hard assets provide the collateral. Speakers have backgrounds in founding, lending and consulting to technology oriented companies.
  • Starting Your Own Practice – Whether due to a desire to break away from the large corporate structure, or forced to because of a layoff, many TMA members have successfully formed their own firms. Speakers will focus on the aspects and realities of starting your own firm and all have first hand experience in doing just that.
The workshops are geared toward a smaller audience in order to promote discussion among the group. The speakers will not be “presenting” to the group, but will instead lead a discussion on the topics where members of the audience will be expected to ask questions and contribute. The goal is to promote interaction among the group and give conference attendees another avenue to meet and network.

Survey feedback for the TMA conferences indicate that many would like more networking options for meeting other attendees. The workshop idea is one of the initial steps toward providing additional networking options when attending a conference. Any other ideas are always welcome and please feel free to contact either myself or Jennifer Bethke at TMA Headquarters with your thoughts.

Register and reserve your hotel room at

Friday, June 24, 2011

Lenders Panel Shares Insight at the TMA Southeast Regional Conference

Turnaround industry professionals from across the southeast assembled in Palm Coast, Florida, June 2-3, for the TMA Southeast Regional Conference, where they heard an eye-opening report on the asset-based lending market from a panel comprised of senior lenders and credit professionals from across the industry.

The conference is one of nine regional conferences held by TMA and its chapters this year, including seven in North American and two overseas, the TMA Europe Conference (Helsinki, Finland) and the TMA Asia-Pacific Conference (Taipei, Taiwan).

My colleague Kristina L. Anderson, managing director, Carl Marks Advisory Group LLC, attended the TMA Southeast Regional Conference. She has passed on some great insight from the session “Lenders Outlook: It Only Hurts When I Laugh.” The distinguished panelists offered the following observations on today’s asset based lending market:
  • Less underwriting and more arrangements - lender groups are more frequently pre-arranged by sponsors as opposed to one lead lender underwriting the deal and selling it down
  • Lead arranger hold levels are rising
  • Springing covenants tied to availability are more prevalent than traditional covenant structures
  • Pricing has reportedly fallen to the L+200-275 range
  • Total senior debt has routinely exceeded 5x EBTIDA, with revolvers in the 2-2.5x EBITDA range
  • Initial equity contribution are falling, in some cases down to 25-30 percent
  • Loan balances - usage under revolvers - have been rising this year
  • Increasing prevalence of FILO (first in last out) tranches, which have a higher advance rate and extra pricing, and are in some cases being used to negate the potential impact of springing covenant thresholds
  • Voting rights continue to be under pressure; traditional-100 percent issues are moving to a supermajority vote
  • Reporting frequency is loosening, and triggers must be tripped to get a BBC more frequently
  • There is a hangover of bifurcated loan structures from the last restructuring cycle (where part of the lender group extended and part retained their earlier maturities)
  • Equity cures are being built in at close and in some cases can be used to satisfy EBITDA tests
  • EBITDA definitions are loosening and inconsistent across the marketplace, raising questions  as to whether, because the EBITDA definitions are becoming vague and inconsistent, the covenants that remain in today’s new deals will never actually trip 

Monday, May 30, 2011

Municipal Messes Keep TMA in the News

TMA’s involvement with cash-strapped municipalities continues to spur interest from news reporters. Recently, a Dow Jones reporter interviewed Scott Eisenberg, a managing partner at Amherst Partners from our Michigan Chapter, and Michael Imber, principal at Grant Thornton, from our New York City Chapter.

Eisenberg was among corporate turnaround professionals summoned by the state of Michigan’s incoming treasurer in December to discuss ways to train emergency financial managers. The program launched in February and Eisenberg and Imber were among the first 60 turnaround professionals certified as emergency financial managers.

In March, Michigan Governor Rick Snyder signed a law giving state-appointed financial managers the power to end employee contracts and suspend collective bargaining. Much hue and cry ensued. Still nearly 400 government and private sector workers took the second emergency manager training course in April. Bloomberg and Bloomberg Businessweek and Crain’s covered developments; less salutary were remarks on the Teamster Nation blog.

The Dow Jones reporter wanted to know what other states may follow suit, as well as how restructuring techniques in the private sector can be transferred to the public sector. Both Imber and Eisenberg discussed how turnaround professionals, in the role of chief restructuring officers, are empowered to make and implement tough decisions to achieve the maximum economic outcome. Not so in the public sector, where the maximum economic outcome may not always be the most politically expedient.

That’s fine, if a municipal, regional or state body can foot the bill for that choice, Imber said. In these times, that choice is less affordable. Eisenberg gave the example of two school districts that previously served 20,000 students, but now each serve only 8,000. It should be one district, but school officials are reluctant to make a decision that spells the end of their own jobs.

Imber says his firm has responded to about a half dozen requests for proposals (RFPs) issued by municipal agencies, illustrating another difference from how public sector agency engagements differ from those in the private sector. Imber foresees a bifurcated municipal distressed market: towns with budgets less than $100 million in revenues that could be served by small firms and large municipalities, counties and states that need broader expert services addressing tax policy, pensions, valuation, accounting and other areas, which large, full-service firms provide.

Eisenberg noted that cash-strapped states don’t face one-size-fits-all problems. Michigan’s structural problems include high unemployment, severe property tax declines, and a large elderly population. Illinois, on the other hand, is hobbled principally by underfunded pensions. He regards the Delphi bankruptcy as a loud wake-up call marking the end of an era of $70,000-$80,000 union jobs in which workers put in a day’s work and received pay for two,  considering pension and benefits.

The public sector will have to endure the “gut-wrenching” change experienced in the private sector, he said, and learn to do more with less.

Read the article.

Tuesday, May 10, 2011

Retiring Bankruptcy Judge Seeks Adequate Compensation

At the TMA Board of Trustees meeting held during the recent 2011 TMA Spring Conference in Chicago, Jack Butler presented a letter he recently received from the Hon. George C. Paine, II, Chief Judge of the U.S. Bankruptcy Court for the Middle District of Tennessee.

In his letter, Judge Paine, who will be retiring at the end of 2011, explains that compensation for bankruptcy judges has remained the same (about $160,000) for over 20 years because of linkage to Congressional salaries. The Judge then notes that, as a result, bankruptcy judges are paid less than other court and government employees who have substantially less responsibility. He also points out the disparity between judicial salaries and the compensation of attorneys in private practice.

Judge Paine warns of the potential consequences to corporate restructuring resulting from the disincentive that inadequate pay creates for capable and experienced bankruptcy attorneys to choose to serve in judicial capacities. He says, “this inequity can only lead to less qualified candidates applying for judgeships rather than highly qualified individuals seeking the position as the capstone to a successful commercial legal career.”

Judge Paine has raised serious concerns regarding the long-term impact of inadequate compensation upon the willingness of highly qualified candidates to serve on the bankruptcy bench. His letter contains a number of examples where federal employees with specialized skills are paid at levels intended to attract strong talent.

We who work in the restructuring industry are challenged by the Judge’s letter to act together “to push for increased judicial salaries so that judgeships become the capstone of successful careers, not stepping stones or gravestones.” It is important that we speak up to educate Congress on the importance of adequate compensation for bankruptcy judges.