Guest author Rachel C. Strickland is the moderator for "Loan to Own Plays - The Good, the Bad and the Ugly," an educational session that takes place Friday, January 28, 9:45 -10:45 a.m. at the 2011 TMA Distressed Investing Conference in Las Vegas.
Meeting with several of my colleagues (and future panelists) the other day, the conversation kept turning to how loan to own strategies are viewed in comparison to other bankruptcy strategies where similar factors are at play.
Control. Cash. Competition. Common enough – but when did getting the most value for your distressed company, or ensuring payback of your secured debt, require that you first past a litmus test of good faith?
Innkeepers in the Southern District of New York comes to mind as a recent example. There was a plan, and there was coordination, but the control was too great; the plan support agreement was thought to go too far. Or consider DBSD North America, also in the Southern District of New York: The timing of the investors was critiqued, motivations were questioned and “strategic” somehow became a dirty word – not only by the bankruptcy court, but by the larger media. Certainly industry and economic stressors have heightened our sense of caution in the past couple of years, but, when a distressed company needs an infusion of capital, when did we start to care about investors’ motivations, and why? Don't most applaud the efficiency of a debtor charging into bankruptcy with a pre-packaged plan or fast-tracked 363 sale with a stalking horse bidder?
What’s the difference? And why does it matter? It undoubtedly matters to certain bankruptcy courts and judges – pick up a paper and you’re likely to see some mention of a loan to own gone sour – but what distinguishes the investment opportunity, roles, strategy and timing of loan to own from other debtor-controlled situations? Should good faith be, as some have proposed, a baseline duty for investors, co-existing with fiduciary duties?
From the concrete decisions and our collective experiences to the larger theoretical issues, and back to the practical: How can one best prepare for a successful loan to own strategy? Join us January 26-28 in Las Vegas at the 2011 TMA Distressed Investing Conference to explore these issues in-depth, and take-away our rules of the road to help you best strategize—whatever side you may fall on.
Wednesday, December 22, 2010
Wednesday, December 15, 2010
Forecast on Distressed M&A and the Shape of the Economic Recovery in Canada
We thought it might be helpful to provide Turn the Page blog readers a brief overview of distressed M&A activity in Canada.
The obvious distinguishing feature of the current Canadian recession is speed — the speed of the descent and the apparent speed of the recovery. It remains to be seen whether the recovery takes the steep “V” shape some economists predict, a long and gradual climb out, or a bumpier, up-and-down “W” path out.
Certainly, Canada’s productivity gap and lagging consumer confidence combined with a climbing dollar are trending toward a slower recovery. Canadian industry sectors relying on U.S. demand likely face a long climb ahead.
There were four key features of the Canadian recession impacting upon distressed M&A:
Stage I: No Deals
Once the 2008 financial crisis had hit the U.S. and then Canada, and for many months following, virtually no distressed businesses were being sold as going concerns. Liquidation scenarios were equally grim, with traditional liquidators opting out of entire asset classes.
A decline in “healthy” M&A in both countries was expected, but the absence of a robust distressed M&A market was not. With no bottom in sight, even liquidators and buyers stayed out of the market. No liquidity meant no PE/Hedge funds were acquisitive since their models required debt to make their deals work. Many creditors took a wait-and-see position. The result: Buyers were holding out for a fire sale and lenders were not pushing assets to market.
Stage II: Bottom in Sight, Limited Liquidity, a Few Buyers and Secured Creditors Starting to Lose Patience
In this second stage, distressed acquisition funds and strategic buyers consider acquiring distressed businesses which were market leaders or niche players. Troubled entities were selling, but in relatively small numbers. Since buyers focused on businesses that complement their own, deals remained hard to close and prices remain low. Moreover, the recovery of the equity markets ahead of the grassroots economic recovery created a price expectation gap. In some cases, existing lenders to a distressed target were financing the acquisition to avoid even lower pricing.
With trouble continuing to plague creditors, insufficient liquidation values to drive “going concern” sales and few buyers, Stage II was not conducive to a high volume of distressed M&A activity.
Stage III: The Future: Exiting the Recession, Increased Liquidity, More Buyers and Impatient Secured Creditors
As mentioned, distressed M&A activity in the coming months will depend on whether the recovery tracks the “V” shape; a long, gradual incline; or the slower and bumpier “W” model. With a quick recovery, fewer businesses will be sold as increased cash flow will sustain them through the recovery. Traditional M&A activity appears to be returning but the targets remain few and far between.
If the recovery stalls or becomes a bumpy “W,” creditors who have been patient may finally start pulling triggers. With floor asset and going concern values being hit and with the return of some liquidity, the pieces are in place for increased distressed M&A activity in 2011 should the recovery stall (but not reverse).
For a more detailed analysis, visit:
http://www.gowlings.com/Services/distressed-m&a
http://www.gowlings.com/trendwatch/pdfs/2_forcast_on_distressed_MA_-_the_shape_of_the_economic_recovery_EN.pdf
David F.W. Cohen is a partner with Gowling Lafleur Henderson LLP and the Leader of the firm’s National Restructuring and Insolvency Practice Group. He is also a member of the TMA Board of Directors and the incoming V.P. of Membership for 2011. His contact information can be found here.
The obvious distinguishing feature of the current Canadian recession is speed — the speed of the descent and the apparent speed of the recovery. It remains to be seen whether the recovery takes the steep “V” shape some economists predict, a long and gradual climb out, or a bumpier, up-and-down “W” path out.
Certainly, Canada’s productivity gap and lagging consumer confidence combined with a climbing dollar are trending toward a slower recovery. Canadian industry sectors relying on U.S. demand likely face a long climb ahead.
There were four key features of the Canadian recession impacting upon distressed M&A:
- No liquidity
- No bottom
- No buyers
- Patient creditors
Stage I: No Deals
Once the 2008 financial crisis had hit the U.S. and then Canada, and for many months following, virtually no distressed businesses were being sold as going concerns. Liquidation scenarios were equally grim, with traditional liquidators opting out of entire asset classes.
A decline in “healthy” M&A in both countries was expected, but the absence of a robust distressed M&A market was not. With no bottom in sight, even liquidators and buyers stayed out of the market. No liquidity meant no PE/Hedge funds were acquisitive since their models required debt to make their deals work. Many creditors took a wait-and-see position. The result: Buyers were holding out for a fire sale and lenders were not pushing assets to market.
Stage II: Bottom in Sight, Limited Liquidity, a Few Buyers and Secured Creditors Starting to Lose Patience
In this second stage, distressed acquisition funds and strategic buyers consider acquiring distressed businesses which were market leaders or niche players. Troubled entities were selling, but in relatively small numbers. Since buyers focused on businesses that complement their own, deals remained hard to close and prices remain low. Moreover, the recovery of the equity markets ahead of the grassroots economic recovery created a price expectation gap. In some cases, existing lenders to a distressed target were financing the acquisition to avoid even lower pricing.
With trouble continuing to plague creditors, insufficient liquidation values to drive “going concern” sales and few buyers, Stage II was not conducive to a high volume of distressed M&A activity.
Stage III: The Future: Exiting the Recession, Increased Liquidity, More Buyers and Impatient Secured Creditors
As mentioned, distressed M&A activity in the coming months will depend on whether the recovery tracks the “V” shape; a long, gradual incline; or the slower and bumpier “W” model. With a quick recovery, fewer businesses will be sold as increased cash flow will sustain them through the recovery. Traditional M&A activity appears to be returning but the targets remain few and far between.
If the recovery stalls or becomes a bumpy “W,” creditors who have been patient may finally start pulling triggers. With floor asset and going concern values being hit and with the return of some liquidity, the pieces are in place for increased distressed M&A activity in 2011 should the recovery stall (but not reverse).
For a more detailed analysis, visit:
http://www.gowlings.com/Services/distressed-m&a
http://www.gowlings.com/trendwatch/pdfs/2_forcast_on_distressed_MA_-_the_shape_of_the_economic_recovery_EN.pdf
David F.W. Cohen is a partner with Gowling Lafleur Henderson LLP and the Leader of the firm’s National Restructuring and Insolvency Practice Group. He is also a member of the TMA Board of Directors and the incoming V.P. of Membership for 2011. His contact information can be found here.
Wednesday, December 8, 2010
Not So Fast - Colleague Warns Not to Get Too Excited Over Black Friday Results
In discussing last week's posting about the success of Black Friday, colleague Peter N. Schaeffer, partner, Carl Marks Advisory Group LLC, warned about getting too excited about the recent results and mentioned his recent newsletter written about the topic. I thought I would share the article with you.
Strong Black Friday sales propelled retail results for November and put retailers and retail investors in giddy moods as visions of sugar plums and hefty sales figures drove stocks higher. Don't be fooled by four days of intense markdowns, record-breaking advertising, dramatic press coverage and, for the first time, the use of the "Black Friday" moniker in most advertising and news reports about the weekend.
Of course, the malls were mobbed. Christmas is less than a month away, and if you were willing to rise at 3 a.m. on Black Friday, plenty of good deals awaited you. Shoppers always pack the malls on Black Friday and the weekend that follows. Our friends in Canada look on with envy at the United States because of the "official" start to the shopping season on the day after Thanksgiving. The rest of the world does not have this shopping delineation and realizes the value of an official start to the holiday, which encourages spending and concentrates advertising and promotions to a tight window.
There is no escaping the fact that sales were strong and certainly encouraging, but let's not forget the margin implications of the radical markdowns and the fact that many people use the holiday weekend to do most of their seasonal shopping. Just how much money remains to be spent is the big question, and will this number propel sales higher than the anemic results of the past two years?
Looking at same store sales results for November, one is struck by the number of retailers with positive numbers. This is in contrast to major negative results in 2008 and 2009. Yet, most retailers are quick to forget what numbers they actually are beating. For example, Abercrombie & Fitch had stellar results for November, with same store sales rising 22 percent. However, last year A&F's same store sales dropped 17 percent, and in 2008 they dropped 28 percent. It's amazing how once A&F learned to promote itself, sales went up. But, if you look at its same store results over the past three years, the company is actually doing only 73 percent of the business that it was doing in 2007. Obviously, the numbers are not entirely accurate due to store closings and other factors but still reflect the sad fact that many retailers have lost significant business over the past several years.
Some of this loss has moved to the Internet, where record sales are made daily and sales penetration is eroding results of the brick-and-mortar stores. This year, the proliferation of free shipping, by just about everyone on the Web, will impact Web margins which, in the case of brick-and-mortar stores with strong online businesses, already reflect the sale prices available in the stores.
Reports from the field regarding sales this past weekend were mixed but generally soft. There is no indication that Black Friday's strong showing is continuing. With the exception of the luxury sector, it looks as though 2010 results will be better than 2009, but not by much. The luxury sector continues to outperform as wealthy patrons are less intimidated than they were last year and are returning to their favorite retail haunts. In addition, solid results on Wall Street and the weakened dollar have propelled luxury sales in New York, which can affect total sales due to the size of the New York market.
We don't want to be Scrooge and ruin the holidays with dour comments and a bleak outlook, but don't be naive and believe all that you read, because the retail economy isn't nearly as good as it seems.
Strong Black Friday sales propelled retail results for November and put retailers and retail investors in giddy moods as visions of sugar plums and hefty sales figures drove stocks higher. Don't be fooled by four days of intense markdowns, record-breaking advertising, dramatic press coverage and, for the first time, the use of the "Black Friday" moniker in most advertising and news reports about the weekend.
Of course, the malls were mobbed. Christmas is less than a month away, and if you were willing to rise at 3 a.m. on Black Friday, plenty of good deals awaited you. Shoppers always pack the malls on Black Friday and the weekend that follows. Our friends in Canada look on with envy at the United States because of the "official" start to the shopping season on the day after Thanksgiving. The rest of the world does not have this shopping delineation and realizes the value of an official start to the holiday, which encourages spending and concentrates advertising and promotions to a tight window.
There is no escaping the fact that sales were strong and certainly encouraging, but let's not forget the margin implications of the radical markdowns and the fact that many people use the holiday weekend to do most of their seasonal shopping. Just how much money remains to be spent is the big question, and will this number propel sales higher than the anemic results of the past two years?
Looking at same store sales results for November, one is struck by the number of retailers with positive numbers. This is in contrast to major negative results in 2008 and 2009. Yet, most retailers are quick to forget what numbers they actually are beating. For example, Abercrombie & Fitch had stellar results for November, with same store sales rising 22 percent. However, last year A&F's same store sales dropped 17 percent, and in 2008 they dropped 28 percent. It's amazing how once A&F learned to promote itself, sales went up. But, if you look at its same store results over the past three years, the company is actually doing only 73 percent of the business that it was doing in 2007. Obviously, the numbers are not entirely accurate due to store closings and other factors but still reflect the sad fact that many retailers have lost significant business over the past several years.
Some of this loss has moved to the Internet, where record sales are made daily and sales penetration is eroding results of the brick-and-mortar stores. This year, the proliferation of free shipping, by just about everyone on the Web, will impact Web margins which, in the case of brick-and-mortar stores with strong online businesses, already reflect the sale prices available in the stores.
Reports from the field regarding sales this past weekend were mixed but generally soft. There is no indication that Black Friday's strong showing is continuing. With the exception of the luxury sector, it looks as though 2010 results will be better than 2009, but not by much. The luxury sector continues to outperform as wealthy patrons are less intimidated than they were last year and are returning to their favorite retail haunts. In addition, solid results on Wall Street and the weakened dollar have propelled luxury sales in New York, which can affect total sales due to the size of the New York market.
We don't want to be Scrooge and ruin the holidays with dour comments and a bleak outlook, but don't be naive and believe all that you read, because the retail economy isn't nearly as good as it seems.
Monday, November 29, 2010
Black Friday Success Brings Encouraging News for Retailers
Early reports suggest that Black Friday was successful for both online and store retailers. More people hit the shops than last year and online shopping increased significantly over the holiday weekend, prior to “Cyber Monday” when online sales are expected to receive another boost.
The traffic at stores nationwide on Friday increased 2.2 percent over last year’s figures, though spending only increased 0.3 percent, both according to research group ShopperTrak. The slight rise in sales may reflect consumers’ ability to find the best deals online, as Internet sales increased 33 percent over last year on Thanksgiving, while on Friday, sales increased 15.9 percent, according to Coremetrics.
Perhaps the most encouraging statistics were the increased number of shoppers and average amount spent per person from Thursday to Sunday. An estimated 212 million people shopped, up from 195 million last year. That is the highest number of Thanksgiving weekend shoppers since the first survey in 2004 according to The New York Times.
The average spent was about $365, more than a 6 percent increase over last year, according to a survey of about 4,300 Americans by the National Retail Federation.
Consumer confidence appears to be on the rise as well, as the National Retail Federation data indicated shoppers were not only buying gifts, but buying for themselves. Increases in purchases of discretionary items such as jewelry and electronics show that consumers are more willing to splurge on big-ticket items for their own use.
Though these increases may signify that perhaps the economy is indeed slowly on its way to recovery, turnaround professionals do not foresee that Black Friday success and optimistic holiday sales projections will significantly aid U.S. retailers and manufacturers.
“While Black Friday sales appear encouraging they come at the expense of flat or decreasing profitability due to the deep discounting that is occurring to build up volume and deplete inventory,” says Kenneth J. Dalto, principal, Kenneth J. Dalto & Associates of Farmington Hills, Mich. “This will have little effect on the fate of the retailers, who will continue to struggle, especially in the first and second quarters of 2011.”
About 80 percent of respondents to a recent Turnaround Management Association survey said increased holiday sales projections would be insufficient to lift domestic manufacturing orders. If any increase occurs, it will be slight, some said, because retailers are loath to incur excess post-holiday inventory.
The traffic at stores nationwide on Friday increased 2.2 percent over last year’s figures, though spending only increased 0.3 percent, both according to research group ShopperTrak. The slight rise in sales may reflect consumers’ ability to find the best deals online, as Internet sales increased 33 percent over last year on Thanksgiving, while on Friday, sales increased 15.9 percent, according to Coremetrics.
Perhaps the most encouraging statistics were the increased number of shoppers and average amount spent per person from Thursday to Sunday. An estimated 212 million people shopped, up from 195 million last year. That is the highest number of Thanksgiving weekend shoppers since the first survey in 2004 according to The New York Times.
The average spent was about $365, more than a 6 percent increase over last year, according to a survey of about 4,300 Americans by the National Retail Federation.
Consumer confidence appears to be on the rise as well, as the National Retail Federation data indicated shoppers were not only buying gifts, but buying for themselves. Increases in purchases of discretionary items such as jewelry and electronics show that consumers are more willing to splurge on big-ticket items for their own use.
Though these increases may signify that perhaps the economy is indeed slowly on its way to recovery, turnaround professionals do not foresee that Black Friday success and optimistic holiday sales projections will significantly aid U.S. retailers and manufacturers.
“While Black Friday sales appear encouraging they come at the expense of flat or decreasing profitability due to the deep discounting that is occurring to build up volume and deplete inventory,” says Kenneth J. Dalto, principal, Kenneth J. Dalto & Associates of Farmington Hills, Mich. “This will have little effect on the fate of the retailers, who will continue to struggle, especially in the first and second quarters of 2011.”
About 80 percent of respondents to a recent Turnaround Management Association survey said increased holiday sales projections would be insufficient to lift domestic manufacturing orders. If any increase occurs, it will be slight, some said, because retailers are loath to incur excess post-holiday inventory.
Friday, November 19, 2010
Burlington Coat Factory Financing Deal Pulled - What are the Implications?
The froth of the high yield market and the volume of leveraged recaps by equity sponsors have been widely reported. Many in our industry have opined that the high level of deal flow is hiding the problems of troubled companies as they are able to ink deals for new financing at better pricing or on covenant-lite terms that rival what we saw before the credit market contraction of 2008. We are used to seeing reports like Debtwire’s calculation that $26 billion in new issue bonds were marketed in the month of October alone. We restructuring practitioners bemoan that these deals are shifting the debt “maturity wall” out even further to 2013 or beyond.
So, it was interesting to note yesterday’s report that Burlington Coat Factory’s $1.5 billion refinancing/dividend recap was pulled after investors pushed back on pricing offered based upon the ratings assigned to the deal (read the Bloomberg article). One deal certainly does not make a trend and maybe the market simply wants to see how retailers perform this Christmas season. In any case, we should bookmark this one and see where things go from here.
Your thoughts?
So, it was interesting to note yesterday’s report that Burlington Coat Factory’s $1.5 billion refinancing/dividend recap was pulled after investors pushed back on pricing offered based upon the ratings assigned to the deal (read the Bloomberg article). One deal certainly does not make a trend and maybe the market simply wants to see how retailers perform this Christmas season. In any case, we should bookmark this one and see where things go from here.
Your thoughts?
Sunday, November 14, 2010
TMA Mourns the Passing of a Friend - Jim Matthews
I was notified by Pat Lagrange and Lisa Poulin, TMA’s chairman and president, respectively, that Jim Matthews passed away Friday, November 12. Pat and Lisa wanted TMA’s leadership to know of Jim’s passing because he had been a dedicated member of TMA’s leadership on the local, regional and national level for many years.
We are lucky to know a lot of people professionally, and we see these folks year in and year out in the course of our professional lives. We remember quite a few and usually, it’s because they touched us in some way. I met Jim Matthews about 10 years ago at a TMA conference. I remember him because he always took the time to talk about opportunities, even though at the time, it was very unlikely that there was anything in our relationship for him. Nonetheless, Jim would take the time to consider how we might work together and I had always hoped that we would find a way to do so. I last saw him in the fall of 2009 and once again, we discussed current developments and opportunities.
I was saddened greatly to learn of his passing – to me, he was a young 60. Our association has lost a great member and leader. Personally, we have lost a friend. For those who would like to know the official details, I’ve reprinted his obituary below.
James B. "Jim" Matthews, age 60 of Rowlett, TX, passed away November 12, 2010. He was born April 4, 1950, in Newton, MA, to Gerald and Charlotte (Boisvert) Matthews. A consultant in commercial real estate, Jim was a member of Rotary Club and the Turnaround Management Association (TMA), local and national. He was married to Carol Butler on October 19, 2002, and was devoted to his home and family. Jim earned his Bachelor's Degree from Assumption College in Worcester, MA, in 1972 and his law degree from the University of Miami (Florida) in 1974. He started his own business, Prime Location, in 1983. Jim tackled the daily challenges as new opportunities. He published numerous articles and was a regular speaker for the American Bankruptcy Institute, TMA and the International Conference of Shopping Centers. In 2003, the TMA honored Jim with its Outstanding Individual Contribution Award. His non-profit activities included the Rotary Club of Preston Center in Dallas, TX (president 1993-94); TMA Dallas Chapter (president 1995 and 2000); TMA National Board Member (1995-2005; vice president of Chapter Relations 2001-2003).
In 2005, Jim co-sponsored a group for small business recoveries after the Katrina disaster in New Orleans. He was brilliant, wise, generous, fun loving, kind and determined. One of his greatest joys was making a child laugh. The world is a better place because of Jim. The eagle is the only bird which flies into a thunderstorm. Friday this eagle flew home. Jim is survived by his wife, Carol Matthews of Rowlett; son, Greg Matthews of Dallas; father, Gerard Matthews of Plainville, MA; stepchildren, Cathy Hanson and Chris Delk; grandchildren, Michael, Erika, Andy, Jack and Emily; sisters, Charlotte McMahon, Maryclaire Quine and Ann-Marie McCarthy; brothers, Michael and Daniel Matthews; 14 nieces and nephews; and 19 great nieces and nephews. He was preceded in death by his mother and brother, Gerard J. Matthews, Jr., in 1993.
Services will be held 11:00 am Tuesday, November 16, at Rest Haven Funeral Home-Rockwall Chapel with Daniel Prescott officiating. The family will receive friends at the funeral home Monday from 6:00 - 8:00 pm. Memorials may be made to the American Cancer Society. Services under the directions of Rest Haven Funeral Home, Rockwall, TX.
Rest Haven Funeral Home in Rockwall
2500 State Highway 66 East
Rockwall, TX 75087
972-771-8641
We are lucky to know a lot of people professionally, and we see these folks year in and year out in the course of our professional lives. We remember quite a few and usually, it’s because they touched us in some way. I met Jim Matthews about 10 years ago at a TMA conference. I remember him because he always took the time to talk about opportunities, even though at the time, it was very unlikely that there was anything in our relationship for him. Nonetheless, Jim would take the time to consider how we might work together and I had always hoped that we would find a way to do so. I last saw him in the fall of 2009 and once again, we discussed current developments and opportunities.
I was saddened greatly to learn of his passing – to me, he was a young 60. Our association has lost a great member and leader. Personally, we have lost a friend. For those who would like to know the official details, I’ve reprinted his obituary below.
James B. "Jim" Matthews, age 60 of Rowlett, TX, passed away November 12, 2010. He was born April 4, 1950, in Newton, MA, to Gerald and Charlotte (Boisvert) Matthews. A consultant in commercial real estate, Jim was a member of Rotary Club and the Turnaround Management Association (TMA), local and national. He was married to Carol Butler on October 19, 2002, and was devoted to his home and family. Jim earned his Bachelor's Degree from Assumption College in Worcester, MA, in 1972 and his law degree from the University of Miami (Florida) in 1974. He started his own business, Prime Location, in 1983. Jim tackled the daily challenges as new opportunities. He published numerous articles and was a regular speaker for the American Bankruptcy Institute, TMA and the International Conference of Shopping Centers. In 2003, the TMA honored Jim with its Outstanding Individual Contribution Award. His non-profit activities included the Rotary Club of Preston Center in Dallas, TX (president 1993-94); TMA Dallas Chapter (president 1995 and 2000); TMA National Board Member (1995-2005; vice president of Chapter Relations 2001-2003).
In 2005, Jim co-sponsored a group for small business recoveries after the Katrina disaster in New Orleans. He was brilliant, wise, generous, fun loving, kind and determined. One of his greatest joys was making a child laugh. The world is a better place because of Jim. The eagle is the only bird which flies into a thunderstorm. Friday this eagle flew home. Jim is survived by his wife, Carol Matthews of Rowlett; son, Greg Matthews of Dallas; father, Gerard Matthews of Plainville, MA; stepchildren, Cathy Hanson and Chris Delk; grandchildren, Michael, Erika, Andy, Jack and Emily; sisters, Charlotte McMahon, Maryclaire Quine and Ann-Marie McCarthy; brothers, Michael and Daniel Matthews; 14 nieces and nephews; and 19 great nieces and nephews. He was preceded in death by his mother and brother, Gerard J. Matthews, Jr., in 1993.
Services will be held 11:00 am Tuesday, November 16, at Rest Haven Funeral Home-Rockwall Chapel with Daniel Prescott officiating. The family will receive friends at the funeral home Monday from 6:00 - 8:00 pm. Memorials may be made to the American Cancer Society. Services under the directions of Rest Haven Funeral Home, Rockwall, TX.
Rest Haven Funeral Home in Rockwall
2500 State Highway 66 East
Rockwall, TX 75087
972-771-8641
Wednesday, November 10, 2010
Holiday Cheer Brings Refinancing Deal
The sparkling lights projecting from the Cobb Energy Performing Arts Centre was the yuletide pickup my colleagues and I needed after weeks spent searching for answers to save a company. Little did we know we would find a solution at the annual holiday party organized by the Atlanta TMA Chapter and the Atlanta Commercial Finance Association. The festivities spread over three floors, with a bar in the lobby, hors d’oevres on the second level and desserts on the third. Approximately 150 people were there with gifts for the Toys for Tots program.
Rob Barnett, Paul Share and I were planning to attend that evening but we were having difficulty mustering the enthusiasm to go out and put on our happy faces. It appeared as though our case was on a cheerless course that I had seen before, ironically, during the holidays. In those cases, the client either: a) endured the misery of managing the liquidation of their business or b) suffered through painful staff layoffs.
Our client, a cabinet manufacturer and supplier to multi-family housing developments, had reached the end of the line with its lender. The company was in default again and the lender closed the door on further funding.
Our team began developing an efficient and value-driven wind down plan and called potential investors and other lenders as a last-ditch effort to save the company. Management had cut to the bone and reached a break-even level. The lending freeze persisted, so we knew we could not count on refinancing. The cabinet maker had significant collateral, but its assets were heavily weighted to equipment and real estate.
The dread of the onset of an upcoming liquidation process was upon us.
With mellow strains of a four-piece jazz ensemble playing holiday music in the background, Rob, Paul and I made the rounds. Rob struck up a conversation with Jim Miller of FirstCity Crestone (FCC). Jim began to talk about his current business interests and something just snapped into place: FCC might be a good fit for the cabinet maker. It offered a unique approach - a hybrid of asset-based lending and private equity investment.
 |
| The team receives the Transaction of the Year Award at the 2010 TMA Annual Convention. |
That conversation was the beginning of a deal that saved the company, retained 180 jobs, and allowed the senior lender to be repaid in full. Our team also earned the 2010 TMA Transaction of the Year Award in the small company category. Read about it here.
That holiday party represents a great example of why TMA matters in our business. It’s an example of the importance of networking and the role the Association can and does play in providing opportunities to network.
The holidays are here. Put your best foot forward.
Best wishes!
Monday, November 1, 2010
From Bankruptcy Court to the World Series
When Nolan Ryan and his ownership group paid $593 million for the Texas Rangers in a bankruptcy court auction in August, it's hard to imagine they envisioned their investment would pay off only a few short months later. But following its first postseason series win and first World Series appearance in the team's 50-year history, the timing couldn't have been better for the new owners.
Win or lose against the San Francisco Giants this week, the Hall of Fame pitcher and his ownership group stand to potentially increase the team's value by $50 million to $100 million based on their postseason run, according to a recent Bloomberg article. The story estimates the Rangers' advancement to the World Series to be worth $40 million next year in increased ticket sales, sponsorships, suite rentals and concessions, in addition to taking in $1 million per game in gross profit from this year's playoffs. It's also estimated that "baseline attendance" for the Rangers will increase for five years.
Considering that prior to emerging from bankruptcy court, the Rangers were in need of a $21.5 million loan from the league to pay its bills, the outlook couldn't be much better for Ryan and his ownership group. Even with the Rangers facing elimination from the Giants.
Win or lose against the San Francisco Giants this week, the Hall of Fame pitcher and his ownership group stand to potentially increase the team's value by $50 million to $100 million based on their postseason run, according to a recent Bloomberg article. The story estimates the Rangers' advancement to the World Series to be worth $40 million next year in increased ticket sales, sponsorships, suite rentals and concessions, in addition to taking in $1 million per game in gross profit from this year's playoffs. It's also estimated that "baseline attendance" for the Rangers will increase for five years.
Considering that prior to emerging from bankruptcy court, the Rangers were in need of a $21.5 million loan from the league to pay its bills, the outlook couldn't be much better for Ryan and his ownership group. Even with the Rangers facing elimination from the Giants.
Wednesday, October 27, 2010
TMA Member Article Published in TheStreet.com "5 Biggest Business Mistakes"
Today, I read an interesting article by a TMA member from Portland, Renee Fellman, CTP. Renee’s article, “5 Biggest Business Mistakes,” was published in TheStreet.Com on October 18. Renee makes some great points, many of which will be familiar to experienced turnaround professionals. Hindsight is 20/20, so I think it best to look to the lessons that each of the case examples offer (Blockbuster, Toys “R” Us, Sears, Borders and BP) and apply them as we all work through our client’s troubles. The mistakes always seem so clear in hindsight, but the best go-forward strategy always seems difficult to identify or implement. I think being able to work through these problems by applying the lessons from the past is the effective turnaround advisor’s key strength. Much of this strength comes from objectivity, since sometimes when we’re mired in the problems, the solutions, though right in front of our faces, are difficult to see. Thanks to Renee for highlighting these issues and to TheStreet.com for publishing Renee’s article. See the article by clicking here.
Monday, October 25, 2010
Where Does Your Newspaper Rank? Circulation Continues to Decline
The biannual circulation report was released today and the only major newspaper showing a significant increase is The Wall Street Journal, which has help from paid e-subsribers and iPad and mobile subscribers.
While the circulation losses have slowed further, to a 5 percent daily drop in the most recent report from an 8.7 percent decline in the spring report and a 10.6 percent plunge in the report one year ago, as reported by Advertising Age, the numbers could potentially impact the turnaround industry. Read more about the report and see where your newspaper ranks.
As always, let me know what you think and post any comments below.
While the circulation losses have slowed further, to a 5 percent daily drop in the most recent report from an 8.7 percent decline in the spring report and a 10.6 percent plunge in the report one year ago, as reported by Advertising Age, the numbers could potentially impact the turnaround industry. Read more about the report and see where your newspaper ranks.
As always, let me know what you think and post any comments below.
Monday, October 18, 2010
What’s in a Number? 13 Reasons to Register for 13-week Cash Flow Webinar
Next Tuesday (Oct. 26, Noon – 1:00 p.m. EST) I will be moderating “13-week Cash Flow: What’s in a Number? The First 13 Weeks May be Everything.” The webinar is part of the TMAccess education program. Learn more about TMAccess and register for the webinar at turnaround.org.
Why should you or other members of your firm participate in this webinar? I’ll give you 13 reasons:
Why should you or other members of your firm participate in this webinar? I’ll give you 13 reasons:
- The 13-week cash flow (TWCF) model is the short-term forecast preferred by practitioners, lenders, creditors and most other constituents.
- A properly prepared TWCF provides a company and all of the constituents with a roadmap to the ultimate exit.
- A TWCF illustrates a company’s cash sources and uses, and any operational shortfall must be provided for through the anticipated exit date.
- TWCF provides much needed visibility for direct materials, direct labor and selling expenses as individual components.
- It helps assess poor collection of receivables, ineffective vendor strategies, or a high fixed-cost burden – all of which may have been buried in other types of financial forecasts.
- The TWCF is an illustrative document that removes some of the obfuscation that can be a part of accrual accounting.
- Often the TWCF provides a dose of reality to management teams that are in denial.
- An accurate TWCF is integral to building credibility and trust between management and lenders in a turnaround.
- For creditors or other providers of capital, the company’s TWCF should be a critical element of the credit or investment process.
- Without a TWCF at the inception of the acquisition, an acquirer cannot be certain of the short- to medium-term capital needs of the business.
- It’s critical for a company’s business and strategic plans, as quantified by the TWCF, to be both accepted by parties in interest and stakeholders and consistently executed by the company.
- Management that consistently meets its TWCF goals will have an advantage in completing a turnaround in a timely and effective manner.
- The TWCF model is the accepted industry standard in all corporate renewal situations because of its practical applicability to its users and its effectiveness as a communication tool.
Register for the webinar today.
Webinar Presenters
Moderator: Frank R. Mack, CTP, Accretive Solutions Capital Partners, Inc.
Panel: Robert D. Katz, CTP, Executive Sounding Board Associates Inc.; James M. Macdonald III, JP Morgan Chase Bank Chase Business Credit; and David W. Wirt, Locke Lord Bissell & Liddell LLP
Friday, October 15, 2010
Wall Street Journal Blog Features TMA Survey Results
The Wall Street Journal's Bankruptcy Beat blog featured the 2010 TMA Trend Watch Survey results today. Read the article.
Thursday, October 14, 2010
Turnaround Industry is in Transition During Uncertain Economic Times
The uncertainty has led many of those in the turnaround industry to believe the number of engagements and estimated revenues for this year will remain flat or decrease. The outlook is brighter for next year, however, as more than half the respondents expect revenues to increase by 10 percent or more in 2011.
Another interesting trend highlighted by the survey results is that 70 percent of respondents said most of their work has occurred outside of bankruptcy court this year, which is significantly up from 42 percent last year.
Find out more of the results at turnaround.org, where you can view the Trend Watch Survey news release and charts showing the poll results.
I'm interested to hear what you think. Post your comments by clicking on the link below and tell us if you agree or disagree with the survey results.
Wednesday, October 13, 2010
Wall Street Journal Reports "Executives Quicker to Call Restructuring Advisers"
Executives at rocky companies are pulling their heads out of the sand and starting to seek restructuring advice sooner, said David Kurtz, co-head of investment bank Lazard Frères & Co.’s restructuring group, during "The New Chapter 11 Playbook" session at last week's TMA Annual Convention. Read more insights from the session in an article by the Wall Street Journal.
Please share your thoughts about Kurtz's comments or the article by clicking on the link below to add comments.
Please share your thoughts about Kurtz's comments or the article by clicking on the link below to add comments.
Jeb Bush Annual Convention Keynote Address Recap by Wall Street Journal
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| Bush presented his keynote address on Thursday, Oct. 7. |
Tuesday, October 12, 2010
Orlando Wrap Up
For those of you who missed TMA's Annual Convention in Orlando last week...you missed a great conference. Not to worry. Most of the panels and speakers will be available on demand through TMAccess, our comprehensive online education resource. Watch for a link on the TMA Web site in the coming days that will let you access the videos.
Over 550 attendees found out that the conference offered much more than great panels. The opening reception was one of the best networking functions I've attended this year. I was able to reconnect with a number of people I haven't seen in a long time. Maintaining relationships will be the key to deal flow in these interesting times.
Many firms had dinners and other events after the opening reception on Wednesday night for targeted networking. Then, on Thursday, TMA hosted a dinner event with humorist Dave Barry who shared with us some hilarious observations on life, our business and using the internet.
Congrats to the TMA staff and volunteers for a job well-done.
Don't forget, TMA's next conference is the Distressed Investing Conference in Las Vegas....January 26-28, 2011 at the Aria Resort. Watch your e-mail for more info.
Over 550 attendees found out that the conference offered much more than great panels. The opening reception was one of the best networking functions I've attended this year. I was able to reconnect with a number of people I haven't seen in a long time. Maintaining relationships will be the key to deal flow in these interesting times.
Many firms had dinners and other events after the opening reception on Wednesday night for targeted networking. Then, on Thursday, TMA hosted a dinner event with humorist Dave Barry who shared with us some hilarious observations on life, our business and using the internet.
Congrats to the TMA staff and volunteers for a job well-done.
Don't forget, TMA's next conference is the Distressed Investing Conference in Las Vegas....January 26-28, 2011 at the Aria Resort. Watch your e-mail for more info.
Friday, October 8, 2010
Ex-Felon Shares MCI White-Collar Crime Story
Walt Pavlo shared his very personal story of white-collar crime during the Ethics Track of TMA's 2010 Annual Convention in Orlando on Friday morning.
Walt provided a candid look into the motivations, actions and consequences of the crimes he committed while working as a senior manager at MCI Telecommunications. His unique perspective provided great insight into the process of how white-collar crimes are committed.
At MCI, Walt was responsible for the billing and collection of nearly $1 billion in monthly revenue for MCI’s carrier finance division. Along with another member of his staff and a business associate outside of MCI, Walt began to perpetuate a fraud involving a few of MCI’s customers. When the scheme was completed, there had been seven customers of MCI defrauded over a six-month period resulting in approximately $5 million in payments to the Cayman Islands.
Walt provided a candid look into the motivations, actions and consequences of the crimes he committed while working as a senior manager at MCI Telecommunications. His unique perspective provided great insight into the process of how white-collar crimes are committed.
At MCI, Walt was responsible for the billing and collection of nearly $1 billion in monthly revenue for MCI’s carrier finance division. Along with another member of his staff and a business associate outside of MCI, Walt began to perpetuate a fraud involving a few of MCI’s customers. When the scheme was completed, there had been seven customers of MCI defrauded over a six-month period resulting in approximately $5 million in payments to the Cayman Islands.
Thursday, October 7, 2010
Bush Offers Turnaround Suggestions During Keynote Address
Former Florida Governor Jeb Bush offered three suggestions for the turnaround of the U.S. during the opening session of the TMA Annual Convention this morning.
1.) Roll back the power of the government.
2.) Embrace American exceptionalism on the domestic front.
3.) Leadership matters in effecting transformation.
What are your thoughts? Please share your opinion by using the comments feature of this blog.
1.) Roll back the power of the government.
2.) Embrace American exceptionalism on the domestic front.
3.) Leadership matters in effecting transformation.
What are your thoughts? Please share your opinion by using the comments feature of this blog.
Wednesday, October 6, 2010
Golf and Tennis Tournaments Provide Unique Networking Experiences
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| (From L-R: Pat Lagrange, Mark Beceu, Bob Eckback, Tom Kim) |
There were two skills competitions - one each for women and men. The closest to the pin was won by Maria Chang and Greg Hengehold. Long drive was won by Maria Chang and Dan Kerrigan.
Congratulations to all the winners and thanks to all who participated.
A special mention and thanks to our golf tournament sponsor, Hilco. Thanks also go to Cole Taylor Business Capital and Myron Bowling Auctioneers for sponsoring our refreshment cart. Lastly, thank you to O'Keefe & Associates and Anderson Bauman Tourtellot Vos & Company for their hole sponsorships.
For both the golf and tennis tournament participants, this was a great way to start the 2010 convention experience and to spend quality time together. We look forward to a great 2010 TMA Annual Convention.
Congratulations to the 2011 Officers!
Congratulations to the 2011 TMA officers, who were approved during yesterday's TMA Board of Directors meeting at the Annual Convention in Orlando:
Chairperson
Lisa M. Poulin, CTP
Partner, CRG Partners Group LLC
Bethesda, MD
President
Mark S. Indelicato
Managing Partner, Hahn & Hessen LLP
New York, NY
Immediate Past Chairperson
Patrick C. Lagrange
Managing Director, Carl Marks Advisory Group LLC
New York, NY
Vice President - Chapter Relations
J. Scott Victor
Managing Director, SSG Capital Advisors LLC
West Conshohocken, PA
Vice President - Education
Noel Boeke
Attorney, Holland & Knight LLP
Tampa, FL
Vice President - Communications
Cathy L. Reece
Attorney, Fennemore Craig
Phoenix, AZ
Vice President - Finance
Thomas M. Kim, CTP
Senior Managing Director, r²advisors, llc
Denver, CO
Vice President – International Relations
Alan Tilley
Principal, BM&T LLP
London, GBR
Vice President - Membership
David F. Cohen
Partner, Gowling Lafleur Henderson LLP
Toronto, Ontario, Canada
Vice President - Conferences
Brad Coulter, CTP
Director, O’Keefe & Associates Consulting
Bloomfield Hills, Michigan
Vice President - Certification
To be Nominated by the
Certification Oversight Committee
Corporate Secretary
Ronald R. Sussman
Partner, Cooley LLP
New York, NY
Chairperson
Lisa M. Poulin, CTP
Partner, CRG Partners Group LLC
Bethesda, MD
President
Mark S. Indelicato
Managing Partner, Hahn & Hessen LLP
New York, NY
Immediate Past Chairperson
Patrick C. Lagrange
Managing Director, Carl Marks Advisory Group LLC
New York, NY
Vice President - Chapter Relations
J. Scott Victor
Managing Director, SSG Capital Advisors LLC
West Conshohocken, PA
Vice President - Education
Noel Boeke
Attorney, Holland & Knight LLP
Tampa, FL
Vice President - Communications
Cathy L. Reece
Attorney, Fennemore Craig
Phoenix, AZ
Vice President - Finance
Thomas M. Kim, CTP
Senior Managing Director, r²advisors, llc
Denver, CO
Vice President – International Relations
Alan Tilley
Principal, BM&T LLP
London, GBR
Vice President - Membership
David F. Cohen
Partner, Gowling Lafleur Henderson LLP
Toronto, Ontario, Canada
Vice President - Conferences
Brad Coulter, CTP
Director, O’Keefe & Associates Consulting
Bloomfield Hills, Michigan
Vice President - Certification
To be Nominated by the
Certification Oversight Committee
Corporate Secretary
Ronald R. Sussman
Partner, Cooley LLP
New York, NY
Monday, October 4, 2010
TMA Governance Behind the Scenes
The Opening Reception at TMA's Annual Convention is one of our industry's most important networking events of the year. Nearly all attendees make sure that they are at the convention site in time to attend the reception before heading out to one of private dinners that are usually held that evening.
What many of our members don't focus on when making their plans is the full day of TMA governance meetings that precede the start of the convention. At these meetings, our Board of Directors, Executive Committee, Chapter Presidents' Council, Certification Oversight Committee and a number of other task forces and committee meet to conduct the business of our association. The meetings usually are the culmination of months of behind the scenes work by TMA's dedicated volunteer leaders and staff. Conferences and webinars are planned, chapter leaders share best practice ideas, and the overall direction of the association for the upcoming year is set.
At the Board of Directors meeting on Tuesday, our Board will elect TMA's new officers from a slate recommended by our association's Nominations Committee, which began work back in April.
All Board of Directors meetings are open to the entire membership. If you want to know more about the direction of our association, please come... and of course, please don't hesitate to raise your hand to join one of our committees. Committee membership is one of the best ways to get more value from your TMA experience. You will have a chance to work closely with other professionals and get to know them while at the same time helping advance the mission of TMA.
So consider this your open invitation to join us at the Board meeting and to get involved in your association.
See you in Orlando.
What many of our members don't focus on when making their plans is the full day of TMA governance meetings that precede the start of the convention. At these meetings, our Board of Directors, Executive Committee, Chapter Presidents' Council, Certification Oversight Committee and a number of other task forces and committee meet to conduct the business of our association. The meetings usually are the culmination of months of behind the scenes work by TMA's dedicated volunteer leaders and staff. Conferences and webinars are planned, chapter leaders share best practice ideas, and the overall direction of the association for the upcoming year is set.
At the Board of Directors meeting on Tuesday, our Board will elect TMA's new officers from a slate recommended by our association's Nominations Committee, which began work back in April.
All Board of Directors meetings are open to the entire membership. If you want to know more about the direction of our association, please come... and of course, please don't hesitate to raise your hand to join one of our committees. Committee membership is one of the best ways to get more value from your TMA experience. You will have a chance to work closely with other professionals and get to know them while at the same time helping advance the mission of TMA.
So consider this your open invitation to join us at the Board meeting and to get involved in your association.
See you in Orlando.
Monday, September 27, 2010
2010 TMA Annual Convention Preview
Our association’s 2010 Annual Convention is being staged in the midst of a time of tremendous change in our industry. The surge in high yield debt activity and the tactical use of loan modifications, extensions and covenant relief have led to default rates falling to back to pre-recession levels.
The 2005 changes to the Code have made bankruptcy processes faster and accelerated the trend toward transactions at the expense of the traditional operational reorganization. Together, these trends are leading to fundamental shifts in the practice of turnaround management and corporate restructuring. The convention program has been developed with an eye toward understanding this evolution and the opportunities that will be created for those of us in the industry. We’ve brought together leading experts to provide insight into real estate restructurings, prepackaged and pre-arranged bankruptcies, and the current dynamics of the lending and equity markets.
Our program also includes a judge’s panel discussing the availability of credit bidding, a distressed investing expert panel providing insights on the future of distressed capital markets, and an ethics panel including first-hand experience from a former white-collar criminal. We are excited to also be joined by our outstanding keynote speakers, former Florida Governor Jeb Bush and former Harley-Davidson CEO Richard Teerlink.
Also, as always, TMA will have plenty of first-rate networking opportunities and activities around the Grande Lakes resort to make the Convention experience a special one. Finally, I’d like to thank our conference chairs Ira Genser and Noel Boeke as well as their entire committee and the dedicated TMA staff for all of their hard work in staging the Convention. I’d also like to thank our sponsors for their financial support of TMA and this Annual Convention.
Again, welcome, and I hope that you enjoy the conference and spread the word about all that TMA has to offer.
The 2005 changes to the Code have made bankruptcy processes faster and accelerated the trend toward transactions at the expense of the traditional operational reorganization. Together, these trends are leading to fundamental shifts in the practice of turnaround management and corporate restructuring. The convention program has been developed with an eye toward understanding this evolution and the opportunities that will be created for those of us in the industry. We’ve brought together leading experts to provide insight into real estate restructurings, prepackaged and pre-arranged bankruptcies, and the current dynamics of the lending and equity markets.
Our program also includes a judge’s panel discussing the availability of credit bidding, a distressed investing expert panel providing insights on the future of distressed capital markets, and an ethics panel including first-hand experience from a former white-collar criminal. We are excited to also be joined by our outstanding keynote speakers, former Florida Governor Jeb Bush and former Harley-Davidson CEO Richard Teerlink.
Also, as always, TMA will have plenty of first-rate networking opportunities and activities around the Grande Lakes resort to make the Convention experience a special one. Finally, I’d like to thank our conference chairs Ira Genser and Noel Boeke as well as their entire committee and the dedicated TMA staff for all of their hard work in staging the Convention. I’d also like to thank our sponsors for their financial support of TMA and this Annual Convention.
Again, welcome, and I hope that you enjoy the conference and spread the word about all that TMA has to offer.
Welcome to Turn the Page
Welcome to Turn the Page, a new blog that was developed to serve as an interactive communications resource for the Turnaround Management Association and its members. As chairman of TMA, I will author Turn the Page and will provide insight about the corporate renewal industry, share TMA information and discuss topics that are relevant to the TMA membership. In addition, additional guest authors also will share their thoughts from time to time.
I encourage you to subscribe to this blog and visit the site often for frequent postings and to share your own comments. I'd like Turn the Page to be as interactive as possible and want to make sure we're writing about the topics that mean the most to you. So if you have any suggestions or topic ideas, please feel free to share them with me.
With the 2010 TMA Annual Convention taking place next week, Oct. 6-8, in Orlando, I will be blogging about the event throughout the week from Florida. For those of you unable to make it to Orlando, this will be a great opportunity to learn more about TMA's annual event.
I encourage you to subscribe to this blog and visit the site often for frequent postings and to share your own comments. I'd like Turn the Page to be as interactive as possible and want to make sure we're writing about the topics that mean the most to you. So if you have any suggestions or topic ideas, please feel free to share them with me.
With the 2010 TMA Annual Convention taking place next week, Oct. 6-8, in Orlando, I will be blogging about the event throughout the week from Florida. For those of you unable to make it to Orlando, this will be a great opportunity to learn more about TMA's annual event.
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