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!
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