M&A Alerts, January 30, 2012

Turnaround Firms in Action

Van E. Conway

Conway MacKenzie: Built
for Success

A successful business professional can usually point to one instance in their early career that set the direction for things to come. In 1974, a former head at Deloitte & Touche gave a young Van Conway some very basic business advice. “Van, if you call back everyone who calls you the same day, you will beat 90% of the people in the business.” Van Conway followed that advice and 38 years later, as Chief Executive Officer of Conway MacKenzie, he still follows and instructs his own team in that ethic.

Conway MacKenzie is one of the premier restructuring and financial advisory firms to the middle market. Across industries, and across the country and beyond, Conway MacKenzie delivers hands-on financial, operational and strategic services that help healthy companies grow and troubled companies get back on track.

In 1987, seizing on the opportunity to open a boutique financial advisory firm—where Deloitte & Touche’s business model did serve litigation support—Conway, together with Don MacKenzie, and just six other employees, opened the advisory firm’s doors for business.

Today, Conway MacKenzie employs a small army of 100 employees located across the U.S. in Atlanta, Chicago, Dallas, Dayton, Detroit, Houston, Los Angeles and New York. As the firm continues its own global growth strategy, it has also developed exclusive affiliations with specific partners in Germany, France and the U.K., and anticipates further engagements throughout Europe, into the foreseeable future.

This year, the firm is celebrating its 25th Anniversary. The celebrations are perhaps most exemplified in the growth the firm continues to cultivate. While some turnaround consulting firms have struggled to keep their doors open in these tough years, Conway MacKenzie has moved two offices to larger workspaces, hired more than 15 employees and expanded its regional offices. Conway describes his firm as a, “Well known, high quality shop.”

Conway himself is nationally recognized in the fields of insolvency/bankruptcy; financing, reorganization and management of troubled companies; mergers and acquisitions; debt restructuring; and litigation support.

He has provided advisory services to under-performing businesses and related parties for over thirty years and is a Certified Turnaround Professional, Certified Insolvency and Restructuring Advisor and Certified in Distressed Business Valuation. His sector engagements include: automotive, manufacturing, steel, service, transportation, distribution and contracting.

As a financial advisor, Conway has worked closely with debtors, lenders and creditor committees in out-of-court or Chapter 11 restructurings and has provided consulting services in turnaround, profit enhancement and cost reduction strategies.

Conway received a Bachelor of Science in Business Administration from John Carroll University and a Master of Business Administration from the University of Detroit. Today, he serves on several corporate Boards of Directors, while writing and speaking frequently on the topics of managing troubled companies and litigation support.

If there is such as a thing as humble pride, Conway exudes it. Clear from his relaxed tone, Conway stands on both his firm’s track record and his firm’s ethics. More to the point, his is a professional service firm and as he puts it, “If the culture is right, the money will be right. If the culture is wrong, the money can’t fix it.” So what makes Conway MacKenzie a right firm?

While every firm’s culture is unique, the professionals at Conway MacKenzie work together to find solutions that fit their clients’ needs. To that end, Conway says in his firm’s culture, “We must all generally agree. It doesn’t mean that we don’t disagree, but when we’re done and we agree—through the process of debating the right thing to do and where we’re going—we are committed…we are going to overcome. And that is how we are what we are.”

The firm’s successful large scale turnarounds include: DavCo Restaurants, Inc., Gas City, JT Packard, Neenah Enterprises and Greektown Casino-Hotel. To gauge just how successful Conway MacKenzie’s turnarounds have been, one needs only to look at the firm’s rescue of Greektown Casino-Hotel. The value of the casino doubled as a result of the restructuring and, had Conway MacKenzie not been in there to lead the restructuring, the Company, the city in which it resides-Detroit, the employees and the investors would have lost.

As he looks across the M&A landscape, Conway is cautiously optimistic. Reflecting on the state of Senior Lenders and the Banks’ current constraints on traditional line term debt, Conway—who has strived and thrived through the downturns of ’08, ‘90-‘91 and the 1980’s—says the situation, “will ultimately rectify itself but it won’t be tomorrow, and when it happens it will happen slowly…”

That said, the firm has built its track record, its succession plan and its future focus.

Conway MacKenzie's hard work and dedication to clients resulted in the firm being named 2011 Turnaround Firm of the Year by M&A Advisor, Turnaround of the Year ($100 Million+). The firm has also been nominate for the M&A Advisor’s Turnaround Firm of Year for our upcoming Distressed Investing Summit and Turnaround and Awards Gala.

Kenneth A. Buckfire

The Art of Expertise:
Miller Buckfire

Financial restructuring is high art and who better to discuss the form than one of Wall Street’s founding practitioners, Kenneth Buckfire. Buckfire, along with Henry Miller, formed Miller Buckfire & Co., out of their early work at Wasserstein Perella & Co., prior to its acquisition by Dresdner Kleinwort.

In 2002, the two forerunners found themselves in the position to purchase the restructuring practice they had built at Wasserstein Perella, as the practice was, for Dresdner Kleinwort, a conflict of interest. There was, of course, no conflict of interest for the two founders of Miller Buckfire, who created the first pre-packaged bankruptcy and invented the convertible DIP loan.

To prepare their clients with debt maturities beginning in 2013—by providing capital to help deleverage and to assist with refinancing debt—Miller Buckfire has recently partnered with Stifel, Nicolaus & Company. The aim is to provide clients with capital markets capabilities, as Stifel Nicolaus is one of the largest equity underwriters in the United States.

The partnership with Stifel Nicolaus will provide Miller Buckfire’s clients with greater accesss to the public equity markets and reinforces Miller Buckfire’s existing financing capabilities where it has led over $45 billion in debt and equity financings for its clients. “The first thing we do, and probably the most important thing we do is educate people about real value and the real needs of the business,” Buckfire said.

Buckfire, on that note, predicts that many companies will be seeking turnaround advisory services, as balance sheets will be trading at discounts, if and when interest rates increase. In short, as he puts it, “The bet companies were making three years ago—that they would grow into their balance sheets, and the economy would get better—hasn’t happened for most people.”

Further says Buckfire, “When you have zero to nominal real GDP growth, you’re not going to see a general improvement in top-line revenue. And that safety net which really underlaid for 30 years the expansion of leverage, and the expansion of comfort with leverage, is over. But a lot of companies have not yet adjusted to that.”

How would he know? Throughout the course of his career, Buckfire has advised clients in a broad range of industries and has managed principal investments in distressed companies and has deep knowledge of the utility industry. His marquee deals include: Niagara Mohawk Power Corporation, Standard Pacific Corp., Calpine Corporation, Level (3) Communications, Exide Technologies, McLeodUSA, ICG Communications, PSINet Inc., Sirius Satellite Radio, BTI Telecom, CMS Energy, CenterPoint Energy, General Growth Properties, Mirant Corporation (Creditors’ Committee), Horizon Natural Resources, Oakwood Homes, TECO Energy, Centennial Communications, Allegheny International, Foamex, Van Camp Seafood, Walter Industries, Burnham Broadcasting, EUA Power Corporation, Dialog Corporation, Imperial Sugar, CRIIMI MAE and Cajun Electric.

In his spare time, Buckfire serves on the board of advisors of the Zell-Lurie Institute at The University of Michigan, and on the Board of Directors of the Philharmonic Symphony Society of New York. He is a trustee of Orpheus Orchestra, a member of the Weil Cornell Medical College Dean's Council, and has been a director and co-founder of several public and private corporations.

Buckfire received his M.B.A. from Columbia University and his B.A. in Economics and Philosophy from The University of Michigan.

When asked his preference with regards to advisory services, it can be said that Buckfire aptly manages to explain his firm’s position in the market, “Our preference is for situations that require a lot of strategic insight.”

“We’re very, very good at business and financial strategy,” boasts Buckfire. How good? Well, in one recent instance the firm reduced their clients obligations to approximately 33% of the original debt. The company is Keystone, a wholesale distributor of aftermarket automotive parts.

Depressed auto sales and the recession hit the Company’s balance sheet, requiring Keystone to take a proactive strategy to address its highly leveraged capital structure.

The Company's former capital structure consisted of $125M ABL due January 2012 (“ABL”), $187M term loan due January 2012 (“Term Loan” and, together with the ABL, the “Credit Facilities”), $175M Senior Notes due November 2013 (the “Notes”) and $18M holdco PIK notes due November 2011 (the “HoldCo Notes”).

Miller Buckfire initiated a competitive process to obtain new financing that, together with a $60M rights offering and a conversion of the Term Loan held by the Back Stop Parties, would repay the Credit Facilities in full. BAML was selected to provide a new $75M ABL and Goldman Sachs was selected to arrange a new $120M term loan on a “best-efforts” basis.

On February 15, 2011, after credit agreements were executed, Keystone launched an exchange offer for the Notes with a stapled pre-packaged Chapter 11 plan. By the end of the solicitation period, the exchange offer satisfied the 98% minimum tender condition, allowing the Company to avoid implementation through Chapter 11.

The transaction, thereby, reduced the Company’s debt from approximately $430M to approximately $140M, and included a new $60M rights offering, new secured financing and full repayment of the Credit Facilities.

In the final analysis, when asked about his art form, Buckfire says, “The way we think about it, we have a pretty full tool kit and not every situation requires every tool, but you have to know when to use them and that’s really the art of it…The art of this is really understanding how one can strategically put together a process that maximizes value at the least execution cost…”

That’s high art.