Distressed Investment Banking: To the Abyss and Back

DID YOU KNOW THAT: 90% of the author royalties are donated to a non-profit organization.

This new book is the definitive work on distressed investment banking by two widely acknowledged leaders in this field. Dealing with the restructuring of troubled companies, an insider's view is provided on the methods and complexities of this fascinating area of investment banking. It demystifies what investment bankers really do and conveys difficult concepts in easily understandable terms. Particular focus is directed to unconflicted advice to boards of directors interested in recoveries of shareholders. Attorneys, accountants, crisis mangers, business students, judges, and investment bankers--as well as management and directors of distressed companies--all will find this book of interest.

No company sets out to become financially distressed. Yet, every year, many public and private companies default on their indebtedness. Almost invariably, the company loses value as a result of the ensuing damage: shareholder value erodes, competitors encroach as they perceive financial weakness, key employees leave, management is distracted by financial crises, and boards of directors are faced with new challenges, duties and potential liabilities. Once this vicious cycle starts, it is critical to stop the erosion of value. Henry F. Owsley and Peter S. Kaufman are highly respected leaders in the field of distressed investment banking. As founding partner and managing director, respectively, for New York-based investment bank Gordian Group, LLC, Owsley and Kaufman are experts at overcoming the complex financial challenges that befall companies in distress.

In Distressed Investment Banking: To The Abyss and Back, Owsley and Kaufman provide an insider's viewpoint on the methods and complexities of restructuring troubled companies in this fascinating area of investment banking. Distressed Investment Banking demystifies what investment bankers really do and conveys difficult concepts in easily understandable terms. The authors take readers through the general processes associated with consummating a distressed M&A transaction, as well as internal financial restructuring and beyond. They reveal the typical mindset of the different parties involved (such as the senior lender, subordinated debt holder, and vulture investor) and explore their respective goals and game plans in a financial restructuring. As Owsley and Kaufman explain, because they face a broad array of issues within the narrow field of distressed investment banking, the tools of the trade comprise a working expertise and conversance with finance, valuation, law, taxes, capital markets and the trading of securities, as well as old-fashioned horse-trading sense. Precisely because all of these skills are needed, there is no substitute for experience and seasoned judgment. They reveal and explain the skills most critical to be effective, including: · How to impose order onto chaos · How to gain the confidence of boards of directors · Tips for advising courses of action, in the midst of great uncertainty · Understanding valuation as precisely as possible · How to design and implement effective financial strategies, with the legal and tax implications of each in mind · How to negotiate effectively with creditors and financing sources · How to run a competitive merger processes in the face of incredible adversity.

They also delve deep into such complex areas of restructuring as equity and enterprise valuation, debt capacity, valuation third-party options and internal plans of reorganization. As Owsley and Kaufman attest, they have long been aware that the financial literature is bereft of thoughtful reflection and insights on distressed investment banking. Determined to fill that void, they present in Distressed Investment Banking the lessons they've learned in their years of practice to shine some light on the dark world of distressed companies and provide illumination for those who, by choice or of necessity, journey into these parts.

Distressed Investment Banking is a book every distressed market professional will want in their bookcase.

Kaufman and Owsley have long been well-respected in the insolvency field. The book is a well-written, sophisticated exposition of what happens behind the scenes in the restructuring of distressed companies and what drives and influences strategic and tactical decisions in these cases, all told with the unique tongue-in-cheek humor of the authors. In some ways the book is a provocative work, and I do not necessarily endorse all of the viewpoints expressed by the authors...[but] one cannot dismiss the authors' views out of hand (even if out of the mainstream in some respects!). Distressed Investment Banking is a book every distressed market profession will want in their bookcase.

From David Breazzano, Principal and Co-founder of DDJ Capital Management, LLC (a Wellesley-based investment management firm focused on distressed and high-yield investing with approximately $3 billion under management):

This is a well-written, insightful and, most importantly, an entertaining guide to the process, constituencies and drama of the corporate debt restructuring process in America from the investment banking perspective. The discussion also benefits from the use of many great examples. I expected nothing less from two of the premier experts in this field and I was not disappointed.

From James Conlan, Firm-wide Vice Chair, Sidley Austin Brown Wood Corporate Reorganization and Bankruptcy Group:

As a bankruptcy lawyer who represents large and middle market debtors with complex capital structures, I can tell you from experience that this is one of the most insightful works I have ever read. It focuses on those items that matter most to a company in distress and it does that in a sophisticated, yet practical, manner. It is a must read for those interested in truly understanding how the distressed business works from inside out.

From Michael L. Tuchin, Co-Managing Partner, Klee, Tuchin, Bogdanoff & Stern LLP:

Distressed Investment Banking is a must read for anyone who is, or may be involved with a distressed company, including boards of directors, senior management, distressed investors, and bankruptcy professionals. Kaufman and Owsley, two giants in the field of distressed investment banking, do a masterful job sharing their vast experience in the distressed investment banking process. Distressed Investment Banking is easy to read, chock full of helpful information, and the most thorough and insightful book on the topic. I'll be giving it away for holiday presents.

From Dan Stewart, Head of Restructuring and Insolvency Practice, Vinson & Elkins LLC

This book is a revelation and offers great insight into the value-added world of savvy restructuring advisors. Who really knew what the heck investment bankers actually do in distressed situations to add value! Kaufman and Owsley are the "pros from Dover" in this business, and if you read this book you'll understand why. A "must-read" for professionals and clients in our restructuring world.

Henry F. Owsley is a founding partner and Chief Executive Officer of the New York based investment bank Gordian Group, LLC. He has over 25 years experience in the business of solving complex financial challenges as an investment banker. He is the co-author, with Peter Kaufman, of The Role of the Investment Banker in Distressed. He has consistently been named one of the ten leading investment bankers involved in bankruptcies and financial restructurings by The Deal. Mr. Owsley graduated summa cum laude from Princeton University and has a Master of Science degree from Massachusetts Institute of Technology, Sloan School of Management.

Peter S. Kaufman is Managing Director and Head of Restructuring and Distressed M&A practice at the New York-based investment bank of Gordian Group, LLC. He has over 25 years experience in the business of solving complex financial challenges as an investment banker and, formerly, as an attorney. Mr. Kaufman is the founding Co-Chairman of the Committee on Investment Banking of the American Bankruptcy Institute (ABI). He is the co-author, with Henry Owsley, of The Role of the Investment Banker in Distressed M&A and the co-author of Trading in the Distressed Market. He has consistently been named one of the ten leading national investment bankers in financial restructurings by The Deal. Mr. Kaufman graduated with honors from Yale College and received a J.D. degree from the University of Virginia School of Law.

	Preface	vii
1.	Crossing the Styx: The Land of the Distressed	1
2.	Dramatis Personae	15
3.	The Importance of Being Strategic	35
4.	Equity and Enterprise Valuation	56
5.	Debt Capacity and Valuation	73
6.	Common Sense and Technical Stuff	87
7.	Fraudulent Conveyance, Other Related Causes of Action and Opinion	96
8.	The Status Quo Approach	109
9.	Exploring Third-Party Options	116
10.	Internal Plan of Reorganization	141
11.	Epilogue	154
Appendix I: The Gordian Index as a Measure of Financial Distress		157
Appendix II: Financial Statement Analysis--the Foundation of an Investment Banker's Views		169
Glossary		186
Index		213