🤓Notice of Appearance: Ted Gavin, Managing Director & Founding Partner of Gavin/Solmonese🤓

For those who are new to us, our “Notice of Appearance” feature provides an opportunity for a professional in the field of restructuring to provide us all with some perspective about the markets generally, the industry, and professionalism. This week, we dialogued with Ted Gavin, Managing Director & Founding Partner at Gavin/Solmonese.

PETITION: There are a number of chapter 22s on the horizon. We've been poking fun at the "successful retail chapter 11" designation but, really, it is tragic and the process is failing. What do you think this is attributable to and what can be done by all involved -- lawyers, advisors, bankers, investors -- to avoid them in the future? 

These are all unforced errors born of greed disguised as impatience in the form of short timelines that are driven by the immovable post of restrictive budgets. All of these chapter 22s have the common trait of having used the first filing to strip off debt, but the efforts to actually fix the underlying company were either insufficient (in some cases) or outright absent. If the company couldn’t meet its operating nut, stripping off some debt just gets you back to the same place eventually. If you’re not taking the time provided by the bankruptcy to fix the damn company, you’re just spending money for what will, in all likelihood, turn out to be a broken investment.

PETITION: The Creditors' Committee pitch process is becoming an inside game. UCC Lawyers are hiding behind UCC FAs and company-side FAs are sharing advance peaks with UCC FAs to give them a first-mover advantage. What gives? 

A lot of this can be blamed on Lawyers’ Rule of Professional Conduct 7.3 (the prohibition against solicitation) and how it hasn’t scaled to deal with modern practice. The other issue is the inconsistency in practice within the U.S. Trustee Program – not only from Region to Region, but from office to office and, in some cases, from staff attorney to staff attorney. What is commonplace in one jurisdiction is impossible to accomplish in another because of this. Are there lawyers with undisclosed pecuniary interests tied to FA firms? Of course there are. Do some FAs shill for law firms while acting as attorney-in-fact for creditors without disclosing some other financial interest in the outcome of that efforts? Of course they do. So do lawyers. It happens. It’s indefensible.

Want it to stop? Change Rule 7.3 so it reflects the committee organization process or form all committees by mail and do away with the “in the room” beauty contests so proxies are no longer necessary and having a hand-holder in the room to move the process in the way they want becomes a moot exercise. Easier said than done, but still doable if the practice decides to get serious about it.

PETITION: There seems to be new independent director candidates popping up every day. Is this good, bad, or neutral? 

It depends. When an independent director is really independent and is there to oversee the process with unfettered autonomy and no fear of reprisals, it’s fine – good, even. When the independent director’s future business depends on finding that nothing untoward happened, and the same individual keeps getting dropped in by the same law firm, it’s a problem. Independent directors should be viewed the same way we view expert witnesses – if you keep showing up for the same law firm, you’re not independent.

PETITION: Restructuring advisory shops seem to be proliferating. What can a financial advisor do in today's crowded market place to separate herself/himself from the crowd?

Be easy to work with. Be about the work. Be proactive. Be generous with your experiences and knowledge. Make your referrals look like effing geniuses for having referred you. Know more than the next shop and be able to do something with it that gives your side an edge. There’s a reason I went to law school, and it wasn’t the scintillating debate and the excitement of reading the Blue Book.

PETITION: What book has helped prepare you to be the best professional you can be? 

Hue 1968 by Mark Bowden. It’s an incredibly compelling analysis of prolifically bad decision-making that became the turning point of America’s involvement in Vietnam. It’s a walk-through, from the ground, of the event that changed our national dialog about our purpose in the war and, when it was over, America would never again fully trust its leaders.

😎Notice of Appearance: Bob Burns, Partner at Bracewell 😎

This week we welcome a Notice of Appearance by Bob Burns, a Partner at Bracewell in the firm’s New York office. We edited the dialogue lightly for content and length. Enjoy.

PETITION: You have a lot of experience in the distressed shipping space. That space, however, has been fairly quiet of late with some exceptions (e.g., Toisa, Emas Chiyoda). Danaos Corporation ($DAC) got an out of court deal done. What do you foresee in the near future in the space and what is one factor that not enough people are considering?

The macro risk is the large amount of tonnage still on the Chinese and Korean order books. A lot of that will come on line in the next two years or so. Reaching capacity equilibrium will continue to be a challenge given the building boom that led to the downfall to begin with. If rates tick up for a stretch, the order books will start to fill. If they tick down, then there is too much tonnage chasing too little freight. From a micro perspective, the instability in the Middle East is always a risk, but a lot of the players in that space have shored up their balance sheets, so they should be able to weather such storms (maritime pun intended, of course).

PETITION: With Venezuela struggling and Iran under sanctions, oil has been surging in price. What does this mean for the oil and gas exploration and production industry? Is it completely out of the woods or will there continue to be pockets of distress there over the next year? If the latter, some examples would be appreciated.

With WTI in the $60-$70 range for the last three months, and the tightening supply due to the cluster-(insert NSFW word here) in Venezuela and Iran, I think the E&P space is largely out of the woods from an industry perspective. A lot of the companies that came out of restructuring had post-reorg projections with oil in the $55 to $60 range. There are still one-offs that are candidates for workout, but that will always be the case. I plead the Fifth on what companies might have a future in Delaware or Houston, but I think they are out there.  

PETITION: Years ago it seemed like a few large firms dominated all of the company side deals. Then the market share seemed to spread out a bit as firms like Bracewell, Akin Gump and Milbank started filing debtor cases. It now feels like massive concentration is back. In your view, what are the most significant macro trends affecting the industry and are they for better or for worse?

I am not sure the massive concentration ever ceased to be the case. From the Bracewell perspective, a lot of our debtor work was for existing clients, although we did get called in to a few cases due to conflicts or because of our specific expertise in both the shipping and E&P spaces. Shameless plug: one thing that has been helpful to us in positioning in debtor cases is our ability to put very senior and experienced partners on the day-to-day deal team. I had one client whose board of directors insisted she use a ...  ahhhh … Big Name Firm. I told her she would probably be working with a partner who wasn’t even in law school back when I was doing mega-cases. She called me many times to lament that I was spot on.

PETITION: What is the best book you've read that's helped guide you in your career?

Is this where I am supposed to say Sun Tzu’s Art of War so I look learned and cultured? Sorry to disappoint, but I’ve never read it. I really think Robert Caro’s three-tome biography on LBJ was one of the most influential. Say what you want about LBJ and his cronies, but they were a very strategic, tactical (and conniving) group of thinkers. I was reading Caro’s books when I was a younger lad and they really shaped my ability to be a strategic, creative thinker (ouch, hurt my arm with that pat on my back).

PETITION Note: No worries, Bob, we pat ourselves on the back all of the time!

🤓Notice of Appearance: Jonathan Tibus, Managing Director of Alvarez & Marsal LLC🤓

This week we welcome a Notice of Appearance by Jonathan Tibus, a Managing Director at Alvarez & Marsal North America LLC in the firm’s Atlanta office. We edited the dialogue lightly for content and length. Enjoy.

PETITION: You have a lot of experience in the distressed restaurant space (e.g., Ignite Restaurant Group, Real Mex). What do you foresee in the near future in the space and what is one factor that not enough people are considering?

It’s a consolidating industry, so in the near future I just see a lot more consolidation - obviously in casual dining but spreading to fast casual after that.  In the last decade, the number of dining establishments in the US has grown at twice the rate of the population, while traffic has been either eroded (no one needs to go to a sports bar to get their game anymore) or siphoned off by grocery stores, c-stores, and meal-delivery services (the restaurant versions of “blame the millennials” and the “Amazon effect”). This has led to lower unit volumes and higher fixed-cost hurdles. On top of that, there’s pressure from every single cost driver: Minimum wages are up, suppliers are consolidating and increasing prices, and compliance requirements keep expanding (ACA, ADA, PCI, NRLB “joint employer” rule, TIPA, local wage and hour rules – it’s a lot). Oil prices are inching up, too, which leads to higher corn prices, which leads to higher feed prices, which leads to higher chicken, pork, and beef prices. Also, for the MAGA! reference, steel tariffs are pushing up keg prices.

Those are the known-knowns, but they’re also collectively the one factor people in our industry often miss: True restaurant turnarounds are a grind at best – can you name one that worked? They require a long time, significant capital, a good team, and then good luck. I’m in meetings all the time where lenders or sponsors start in on “let’s do a 2-for-1 coupon!” or “let’s sub in Tilapia for Cod!” I always think “what are we doing here guys?” There’s no easy button - either commit to invest in a long-term rebuilding plan with a team that you trust, or just sell it to someone else who will.   Save yourself the wasted effort in the meantime. Your old, tired store isn’t coming back to life because you put out artisanal boneless chicken wings. It’s all about hiring well, running good shifts, and taking care of your customers so they’ll want to come back.

PETITION Note: It doesn’t look like labor pressures will be letting up anytime soon, whether in terms of quality of hires or cost.

PETITION: A&M appears to be making a greater push -- in this sound economic environment -- to provide "performance improvement" work to diversify away from just pure restructuring advisory work. Is this accurate and to what degree is the approach to PI different than restructuring work?  

[O]ur push into PI creates two important opportunities: First, a presence at a different place in the corporate life-cycle than restructuring. For a non-distressed restaurant, for example, we have resources in strategy, real estate, supply chain, marketing, and human resources. Targeting those areas for improvement while the client is still healthy, has engaged management, and ample liquidity means the death spiral may never begin. Second, PI work gives us the opportunity to approach companies directly, as opposed to relying on lenders, sponsors, and law firms for referrals. This will be of great importance as we continue to grow the firm. And, of course, we believe that we have a natural edge in the space given our operational heritage and restructuring DNA – we like being in the field or at the plant making changes rather than in the office making slide decks.    

PETITION: You work in the Southeast. What trends do you see in that region of the country that may lead to geographically specific restructuring activity? 

I definitely cut my teeth on southern-specific industries … like farming, textiles, and poultry processing, and those do seem to be back on our radar. Farm credit has been drying up as the major lenders scale back or get out and the remaining lenders hike up fees and interest. Tobacco is increasingly challenged in North Carolina as competition from other countries is pricing our farmers out of the market (again, millennials – earlier generations favored Carolina tobaccos for their flavor, consumers today don’t really care about origin). And of course, Hurricane Michael just drowned everyone’s crops, and killed a bunch of hogs and turkeys and chickens. Could be time for all the guys who geared up for the Ch. 9 wave a few years back to start studying up on Ch. 12.

PETITION: There has been a proliferation of restructuring advisory firms in recent years. How does that affect your approach to business development and do you consider industry consolidation (Alix/Zolfo) to be a long-term positive or negative for A&M? 

Interesting question in that it addresses consolidation and proliferation at once, and I think one is definitely driving the other.

As a firm grows or consolidates, the professionals naturally become more narrowly and deeply focused, leading to a depth of resources that a smaller firm can’t compete against.  Need a guy who knows the shipping business in Argentina?  We’re going to have that.  California wage and hour laws?  Got it.  There’s comfort in that for a lot of clients, so we highlight that whenever we can.  Second, the firm starts to get a lot of controls and infrastructure to help manage the business.  These are necessary at some point, but for some people this feels like bureaucracy and politics.  The people I’ve known who started their own shops are energetic, ambitious guys who are just happier not dealing with that part of the business, wanted to remain generalists, and didn’t want to feel like part of a machine.  I don’t see it necessary as a positive or a negative for A&M – we’re going to win when we compete for clients who value our depth, breadth, capabilities, and brand.  The smaller shops can’t do every job, but they can also go deeper into the middle market to find the right roles.  I do think that we – the bigger firms – have a natural advantage in the most difficult part of the business right now:  hiring good people with 4-7 years of experience.  At that level, we can sell candidates on our stability and breadth and also offer a brand-name for their resume while they’re building their early careers. 

PETITION: What is the best book you've read that's helped guide you in your career?

I’m trying as hard as I can to answer this with “A Confederacy of Dunces,” which is my favorite book.  It’s hard to call it a business book or a career book, though, so I’ll go with “The Goal” by Eliyahu Goldratt instead. For a guy with a degree in English, it was a digestible introduction to operations analysis and management, and it showed how thinking about problems analytically can actually lead to solutions. It’s rooted in manufacturing, but the lessons apply to us, too: Turnaround people have an instinct to roll out lots of initiatives at once. Thinking about system-wide capacity and constraints with our clients can help control that instinct, forcing us to do smart stuff, not just lots of stuff. As the book says, activating a resource is not the same as utilizing a resource. Plus, it has Herbie the fat cub scout as an important character, and he reminds me of a young Ignatius P. Reilly from “Confederacy”. Everyone should read both.

😎Notice of Appearance: J. Scott Victor, Managing Director at SSG Advisors LLC😎

This week we welcome a Notice of Appearance by J. Scott Victor, a Managing Director at SSG Capital Advisors LLC, a boutique investment bank based in Philadelphia. We edited the dialogue lightly for content and length. Enjoy.

PETITION: You've carved out a niche in the middle market. What is your assessment of distress in the middle market today and what may we expect in that area in the next 6-9 months?

There is always distress in the middle market.  Regardless of the macroeconomic environment there are universal constants: undercapitalization, too much debt, poor management decisions, sales declines, lack of margin control, excessive expense structure.  I could go on and on – all resulting in a steady stream of distressed middle market companies.

From multi-generational family-owned or single owner and operator businesses with inadequate systems and not enough equity capital to PE portfolio companies leveraged to the hilt with debt to VC-backed and public bleeders that have been startups for a decade or more burning through tens to hundreds of millions to failed rollups, the distressed middle market has it all including real industry-specific Disruption.  These beloved underperformers are in every industry and every region of the country and while they aren’t generally big enough names to warrant coverage in Petition, they provide an abundance of work for middle market professionals.

Nothing will change in the next 6-9 months.  There is an incredible amount of debt capital from an ever increasing number of lenders – bank and non-bank ABLs and cash flow lenders, BDCs, commercial finance companies, factors, equipment and real estate lenders.  The better underperformers will continue to be refinanced out of their existing bank lenders and live to sink or swim next year.  The rest can expect §363 sales, Article 9’s, ABCs, receiverships, or straight-up liquidation.  It’s economic Darwinism at work.

PETITION: What is one thing that most needs changing in order for middle market clients to get the most they can out of an in-court bankruptcy proceeding? 

Don’t get me started on this one!  Chapter 11 is too expensive and lower middle market companies can’t afford it.  More importantly, the lenders for the smaller borrowers don’t want to pay for it.  Thus the rise of Article 9’s, ABCs and state court receiverships being utilized for smaller transactions.  Almost every one of my Chapter 11 cases has two sets of counsel, a financial advisor, an investment banker, and a claims agent and that’s just for the debtor.  Factor in two sets of counsel and a financial advisor for the creditors committee and another two sets of counsel and financial advisor for the lender(s) and that’s before any other professionals such as real estate advisors, special counsel, liquidators and independent board members. And, don’t forget the new UST fee schedule!  The fee burden on debtors is often why there’s rarely ever a meaningful distribution to unsecured creditors.  I know I’m preaching to the Petition choir, but Chapter 11 just costs too much.

PETITION Note: See #1 above if you skipped the end.

PETITION: We've written a lot recently about the decline in L. Brands' Victoria's Secret ($LB) line and the rise of direct-to-consumer and celebrity-backed (i.e., Rihanna) brands. You did the Peekay Acquisition LLC bankruptcy. What lessons did you learn there that may apply to L Brands and other legacy lingerie brands that are currently under attack? 

I learned that sexual health and well-being is a very good thing!  Peekay was too small to be public and had way too much debt resulting from a poorly-implemented roll-up strategy.  Victoria’s Secret has numerous issues including deteriorating product quality resulting from revolving manufacturing facilities around the world and an underwhelming yet distracting customer store experience that a huge marketing spend can’t fix.  Insta-friendly celebrity brands, including lingerie and cosmetics are trending, but their sustainability is ultimately tied to quality, buying experience and the celebrity quotient.

PETITION: What is the best piece of advice that you’ve been given in your career?

My first legal mentor told me that practicing lawyers will make a good living, but never be rich.  My second legal mentor told me to become an investment banker.  My investment banking mentor told me to dress well and to drink heavily.  I take advice well.

PETITION: What is the best book you’ve read that’s helped guide you in your career?

Two books:  The 1st edition of Peter and Wendy by J.M. Barrie – the opening line “All children, except one, grow up.”  I say no more.

Hostile Witness by William Lashner.  Bill was a colleague at my first law firm in the mid-80’s and the son of my legal mentor.  He left the firm to become a writer.  I am Victor Carl.

😎Notice of Appearance: Evan Hengel, Managing Director of Berkeley Research Group😎

This week we welcome a Notice of Appearance by Evan Hengel, a Managing Director in the sunny Los Angeles office of Berkeley Research Group LLC. We edited the dialogue lightly for content and length. Enjoy.

PETITION: You're located in the entertainment capital of the world. What is your assessment of distress in TMT today? What may we expect in the next 6-9 months?

Looking at the local LA entertainment scene (to address the broader TMT market would require more space), further studio consolidation (e.g. Disney/21st Century Fox) could put the next tier of industry participants in a tough position, as they’ve already struggled to adapt to a theatrical release schedule that is organized around fewer tentpoles. That said, with the number of new expensive series (I hesitate to call it TV) being green lit, concerns of a “content bubble” in the near term are probably overblown, as the appetite for that content appears to remain insatiable, even if it’s shifting from theaters to the home. The more interesting story may be the role of tax incentives in the geography of movie/TV production. Other states are obviously hungry for a piece of the industry (hello, Georgia and Louisiana), and foreign countries have not been shy either (a 32% tax rebate may have played a role in the decision to shoot The Last Jedi in Ireland, for example). The recent renewal of California’s own tax credit program will help slow the exodus of work, but there’s no denying the trend toward industry decentralization.

PETITION: Unbeknownst to many, LA has one of the top tech ecosystems in the country now. We write a lot about "#BustedTech" in PETITION. As an operational advisor, what is one piece of advice you'd give early stage startups to ensure that they're setting themselves up for operational success down the road? 

I’d advise early stage founders to do everything possible to keep more cash than you think you need. As we also see on the other side of disruption, horrific business decisions are often made not out of incompetence, but rather due to a lack of liquidity/options. Trying to negotiate bridge financing between rounds is tough to do when the people on the other side of the table know you’re low on alternatives, and it’s near impossible to make the right long-term strategic decisions/investments when you’re worried about making payroll next week. Also, hire people who are good at what you aren’t. A spitting image of yourself may grab your attention (we’re all prone to vanity) but won’t add new skills to your company.

PETITION: Your firm tends to do a lot in retail. What is one thing that retail management teams continue to get wrong despite all of the hyper-focus on the area today? 

One thing we often still see is a failure to amend merchandising plans to reflect realistic expectations of traffic and conversion. The effect of the resulting glut of inventory is both immediate and long term…margins deteriorating as excess goods are then shoved through discount channels, which in turn hurts the long-term perception of the brand in consumers’ eyes (nobody wants to see their prized $750 jacket being sold at an off-price retailer next week for 60 percent less). Committing to a lean purchasing plan is difficult, as it often requires you to admit that tough times loom ahead, but the risk of not doing so is immense. Being realistic about demand (and the brick-and-mortar footprint needed to meet that demand) will be a key differentiating factor in who will survive the current period of disruption intact. Those who can hold back meaningful allocations of certain products at the distribution center to assess where it should be deployed at maximum margin get bonus points for reducing discount-dependency to clear inventory, but the road to get there has a lot of potholes.

PETITION: What is the best book you’ve read that’s helped guide you in your career?

Reading The Lords of Strategy by Walter Kiechel gave me a helpful sense of history regarding the consulting world. It’s easy to step in to this field and think of it as relatively static, but when you go back in time, it’s actually changed fairly quickly relative to other professional disciplines. The types of work that consultants were engaged in during a given decade are often unrecognizable when compared to the decade prior. Shining that light on restructuring advisory specifically (a fairly minor subset of the larger community), becoming an expert at 13-week cash forecasts and lease rejection analyses may keep you around in the immediate future, but long-term success will be enjoyed by those who push boundaries and identify what executive teams and stakeholders really want from their advisors that they aren’t already getting (and may not even know that they want yet).

😎Notice of Appearance: Darren Klein, Partner at Davis Polk & Wardwell LLP😎

This week we welcome a Notice of Appearance by Darren Klein, a Partner in the restructuring group at Davis Polk & Wardwell LLP. We edited the dialogue lightly for content and length. Enjoy.

Your firm, Davis Polk, appears to do a lot of international restructuring work. With turmoil in emerging markets lately, what are some things that distressed investors should be focused on? A previous commentator highlighted US-denominated debt in a strong dollar environment... 

I would highlight the recent retreat from globalism and the increase in nationalism happening around the world. Knock-on effects of a trade war with China will show up in many other countries. Take South Korea as an example. There has been plenty of press coverage asserting that South Korea would be one of the big losers in a trade war as a large supplier of products to China that then get exported to the US. Less well covered is that rising nationalism in China may continue to put independent downward pressure on South Korean businesses operating in China. The combination could create a tipping point for at-risk companies.  

More generally, increasing nationalism could hurt the value of foreign IP in countries where consumers associate that IP with “disfavored” countries. Distressed investors relying on foreign IP of US companies to sell at high valuations beware.

Dovetailing off of the previous question, what is one notable trend that you expect to see in Q4 of this year that not enough people are talking about? What about the beginning of 2019? 

I don’t know about Q4 or the beginning of 2019, but not enough people are talking about batteries. Every year, computers get smaller and faster. Every year, Amazon can deliver more products almost instantaneously. Yet every year, my smartphone battery gets worse. Five years ago, my phone could go several days between charges, now my new phone doesn’t even make it a full day. The lack of disruption in the battery industry is troubling. Whichever company figures out how to disrupt the battery industry is going to chase Apple and Amazon to a trillion dollar market cap. 

In fact, I think this could make an interesting regular coverage piece in Petition.  You are great at spotting disruption in an industry.  I especially enjoy your retail coverage showing the story is more complicated than an “Amazon effect.”  But you are missing an opportunity to showcase the disturbing lack of disruption over time in certain industries. Where is my my battery 2.0?

PETITION Response: Perhaps you had one of those faulty Apple batteries? Did you get it swapped out? In any event, yes, batteries are a big deal. Tesla’s valuation is a testament to that. Do you value it as a car company or as a battery company? The stock market seems to be stuck in a perpetual catatonic state of confusion on the subject.

What is the best piece of advice that you’ve been given in your career?

When I was a junior associate, a mentor told me that the most precious asset a lawyer possesses is his or her reputation. It is very true advice, especially in our small restructuring community. A reputation takes a career to build and can be squandered in a moment.  

What is the best book you’ve read that’s helped guide you in your career?

“Oh, the Places You’ll Go!” by Dr. Seuss.  The book has a deep message. Life will not always go the way you would like, but you should never give up.  You should keep working hard and focus on controlling the things within your control.  The genius of Dr. Seuss is that he delivers an important message in a way that my young children can understand and want to hear again (and again . . . and again).  If only more lawyers could draft that way!

Notice of Appearance: Gabriel MacConnaill, Partner at Sidley Austin LLP

This week we welcome a Notice of Appearance by Gabriel MacConaill, a partner in Sidley Austin LLP’s sunny Los Angeles office.

PETITION: What is the best piece of advice that you’ve been given in your career?

GM: Serious: “Observe successful people you admire and adopt the traits you can authentically inhabit.” Somewhat tongue in cheek: “Don’t **** it up.”

PETITION: What is the best book you’ve read that’s helped guide you in your career?

GM: Lawyering skills: The Curmudgeon’s Guide to Practicing Law by Mark Herrmann (especially recommended for younger lawyers). Substantive knowledge: Collier (I know, I’m a nerd).

PETITION: What is one notable trend you expect to see in the second half of ’18 or first quarter of '19 that not enough people are talking about?

GM: Increasing European impact on U.S. restructuring. Many public companies took advantage of tax advantaged structures since the last cycle (lots of double Irish with a Dutch sandwich etc.). In addition, international debt investing structures mean that there is a European bond overhang on more U.S.-based/U.S.-focused companies than the last time we ramped up. American professionals should be aware of potential solutions and leverage points available, particularly the flexibility of schemes of arrangement provided by our friends in the United Kingdom, and the framework for cooperation across European jurisdictions in the European regulation on insolvency proceedings.

PETITION: What is one longer-term disruptive trend that scares you?

GM: Kids aren’t watching traditional sports anymore. What am I going to do in my meager free time when those business models fail? Personal fears about professional hockey collapsing aside, higher education is something like one-sixth of the U.S. economy, mostly funded or guaranteed by you and me (taxpayers). What is going to happen if (when?) there is a mass default on student loans? We want distress, not destruction.

PETITION: On the flip side -- as a restructuring professional -- that excites you?

GM: Short-term memories in the financial sector (e.g. cov-lite loans account for the largest share of the leveraged loan market ever).

PETITION: What is the biggest threat to the bankruptcy system?

GM: Inflexibility. Whether by statutory fiat, or judicial decision, rigid rules work against the success of our system. See my answer above, some of the rest of the world is catching up; this is a competition and we should work purposefully to ensure the United States remains the restructuring destination of choice.

Notice of Appearance: Ted Stenger, Managing Director at AlixPartners LLC

This week PETITION welcomes a Notice of Appearance by Ted Stenger, Managing Director of AlixPartners LLC.

PETITION: What is the best piece of advice that you’ve been given in your career?

TS: I’ve been doing this for over 35 years and have received a lot of advice. Sifting through the years the advice, what sticks out the most was the line, “Successful people are prepared to be lucky.” There is an enormous amount of wisdom packed into those seven words, starting with the word “prepared.”

PETITION: What is the best book you’ve read that’s helped guide you in your career?

TS: I am not a fan of business books as I think they are largely written by people who simply re-package common sense and put a fancy name on it, like ‘transformative leadership.’ Having said that, early in my career I read “Getting to Yes: Negotiating Agreement Without Giving In” by Roger Fisher and William L. Ury, which, as a young professional, I found very instructive as it focused, in part, on what motivates people on personal and emotive levels in negotiations.

PETITION: What is one notable trend you expect to see in the second half of ‘18 that not enough people are talking about?

TS: The bankruptcy and restructuring process has become very costly, especially in light of the fact that so many Chapter 11s today are almost exclusively focused only on the debt stack with little attention paid to fixing the operations of a debtor which often requires more time although it is where enterprise value is created. The profession needs to get more efficient, demonstrate better case management skills and therefore drive up the value equation. A soon-to-become-classic line from the 2017 movie, “Molly’s Game” sums it up. After Molly’s father, a psychologist, delivers very deep and meaningful insights to her, he says, “It is amazing what you can can accomplish in three minutes when you are not billing by the hour.” Nuff said.

PETITION: What is the most under-appreciated service restructuring professionals can provide a distressed client?

TS: Helping management redefine success, both for the organization and, perhaps just as importantly, at the personal level for the company leader. While restructurings and bankruptcies don’t have the “taint” of 30 years ago, they are still for most individuals and organizations seen, initially at least, as a failure. Many if not most clients have not been through real corporate trauma. There is fear and shame permeating the organization and its leadership. Restructuring professionals sometimes don’t fully appreciate this as we have already “seen the movie” many times. Therefore, helping re-define success as early in the process as possible can be a key element of a successful reorganization.

PETITION What is the biggest disservice that restructuring professionals are doing to clients? Don’t pull any punches.

TS: Clients need to understand what will happen in the beginning, middle and end of the restructuring, and understand it from several vantage points. Restructuring pros sometimes fall short on that front. The most obvious one is what is the legal and court process. Second, is fully explaining what the likely obstacles to a deal and what should be expected as to the behaviors of various constituents. Third, what are the implications to operations, employees and customers and how and when can they be addressed? All these are sometimes not done well by restructuring professionals, resulting in less efficient and effective restructurings. Or, in some instances, these things are done once, but not repeated enough. Or, in other situations, the professionals cannot explain all three, as they haven’t done their own homework and simply aren’t knowledgeable enough.

PETITION NOTE: Yikes. Sure sounds like clients are getting a ton of bang for that $1,750/hour buck.

Notice of Appearance: Jeremy VanEtten, Director at Gavin/Solmonese

This week PETITION welcomes a notice of appearance by Jeremy VanEtten, Director in the New York office of Gavin/Solmonese.

PETITION: What is the best advice you’ve gotten in your career?

Jeremy: Listen before you speak. Many times when people first meet me they think I’m quiet, reserved, and even shy. They couldn’t be more wrong. Early on in my career, I learned it's infinitely more important to understand what the other person is saying before formulating a response -- especially if there's conflict involved. Having a thoughtful response can go a long way towards building mutual understanding.

PETITION: What is the best book you’ve read that’s helped guide your career?

Jeremy: Who Moved my Cheese by Spencer Johnson.  When I’m in a rut, approaching a decision, or seeing change on the horizon, a quick visit with this book greatly helps frame my perspective.  The concepts in this book led to my two career changes including entering the restructuring industry. Understanding that I am solely responsible for my personal and professional success, and that I’m not owed anything from anyone is the key here. Get to a point where no one — or no set of circumstances — can take away your cheese.

PETITION: What is one notable trend you’re seeing in ‘18 that not enough people are talking about?

Jeremy: Deal flow seems to be getting more and more consolidated making it harder for mid-level, thirty-something, restructuring professionals to figure out the best way to land new engagements and cases. Many of us have been told: "Start by doing good work, network, attend industry conferences, volunteer, etc.... and it will all come together." But should those of us under forty rethink this formula? Do we need to finally understand personal branding and how to promote ourselves? Should we be expanding the list of organizations we actively participate in beyond the restructuring community? Do we really understand what the decision makers are looking for? All good questions when our industry is evolving. 

PETITION NOTE: Jeremy is the most “junior” person we’ve had in this NOA section and provides some on-point perspective. Thanks, Jeremy.

Many people are concerned about the dearth of deal flow and the concentration of (the limited) deal flow among a few select power players. Jeremy is correct: nobody owes you anything: you need to go out and make your own opportunities. What can you do — given the realities of the industry today — to win new business? What are realistic assumptions given your platform, your methods, and your teammates? What differentiates you from the rest of the pack? There are plenty of people networking and providing solid service. What other edge do you have? Aside from what your platform provides: what investments are you making in your own career? Who have you gotten in your corner to support you? All good questions.

Notice of Appearance: Larry Perkins, CEO and Founder of SierraConstellation Partners

PETITION: What is the best piece of advice that you’ve been given in your career?

LP: Making a quick and good decision with bad information is much better than a slow and perfect decision with perfect information.  In our business sometimes its better to make a pretty good quick decision rather than waiting too long and the decision being made for us.  This was taught to me by one of my mentors 15 years ago and has stuck with me.

PETITION: What is the best book you’ve read that’s helped guide you in your career?

LP: As cliché as it may sound, both Fountainhead and Atlas Shrugged by Ayn Rand have had a huge impact on my life. I think the focus on independence, objective thinking, and having a philosophical spine (regardless of whether you agree with it) have turned me into a better practitioner and leader. I also think there is a big emphasis on non-conformist thinking which is, in my opinion, the essence of creative thinking and solution making.

PETITION: What is one notable trend you expect to see in the second half of ‘18 that not enough people are talking about?

LP: More of the same. I think people are expecting things to change, but I don’t see it.  There is a lot of talk about a restructuring bubble building, maturities rising, a new real estate bubble, and other themes like this that I’ve heard throughout my career. I’d expect that things will basically stay as they are right now until something absurd or otherwise totally unexpected comes and punches us all in the mouth.

PETITION NOTE: This is a fair point. Everyone gets in the business of prognosticating but the last several cycles started due to wholly unforeseeable exogenous events.

PETITION: What is the most under-appreciated service restructuring professionals can provide a distressed client?

LP: Emotional support of clients and principals. We work primarily with middle market companies — including family-owned businesses. Compassion and empathy are underrated skill sets. We could callously conclude “this is just business,” but, ultimately, we’re dealing with emotional beings caught in an insanely stressful situation. People find themselves retaining us because something bad usually happened, and its very rare that those bad decisions that led to our retention were intentional or otherwise nefarious. I go into situations without preconceived judgement and with the objective of understanding a situation rather than rashly concluding that a person is dumb or unsophisticated. It’s rarely the case that someone is those things, and it’s dangerous as a practitioner to assume so.   

PETITION: What is the biggest disservice that restructuring professionals are doing to clients?

LP: Restructuring — particularly formal restructurings — have devolved into a very litigious, expensive, and inefficient way to work out complex situations. A big part of this is the e-mail “thuggery” that is prevalent in these situations: it is more focused on getting a “gotcha” rather than a solution. If people really were trying to get to the right answer, I’d expect that there would be a whole lot more phone calls and face-to-face meetings, rather than 30 person CC lists and 27 versions of documents. If we take the approach that we’re trying to solve the problem, park aside the anger and posturing that comes with the process, and try to work towards a solution knowing that everyone is being impacted, we’ll collectively provide more value to our clients.