Michael Epstein due to speak at ABI Spring Meeting

Is the Chapter 11 Industry Distressed?

With the ever-evolving economic landscape there have been dramatic changes in how and when Chapter 11 is used to address failed businesses.  This panel of leading experts will discuss the trends in the use of Chapter 11 to reorganize or sell troubled businesses.

Panelists:

Keith Shapiro, Greenberg Traurig, LLP (Moderator)

Daniel Dooley, MorrisAnderson

Michael Epstein, CRG Partners

Rebecca Roof, AlixPartners

Come see this dynamic panel provide their insight into how restructuring professionals can expect to stay busy in the next economic cycle at ABI's Spring Meeting, April 19-22 in National Harbor, MD. For more information, click here.

Lisa Poulin due to speak on the TMA Panel at ABI Spring Meeting

TMA Panel: Effective Presentation of Financial Analysis

With many contested restructurings, the credibility and quality of financial analyses, whether consisting of evidence on valuation, feasibility analysis, interest rate testimony or damage calculations are crucial in determining the final outcome.

Panelists:

H. Slayton Dabney, Jr., King & Spaulding LLP (Moderator)

Bradford L. Coulter, O'Keefe & Associates

Thomas M. Kim, r2 advisors, llc

Lisa Poulin, CRG Partners

Lisa Poulin and her fellow financial advisors will be discussing effective ways of presenting financial analysis in a concise, easily understood and effective manner that will increase your chance of prevailing.

Come see this seasoned panel team at the ABI Spring Meeting, April 19-22 in National Harbor, MD.  For more information, click here 

William Snyder due to speak at TMA Annual Spring Conference

Turnaround Industry Trends - The Good, The Bad, The Ugly

William Snyder will be moderating a team of industry experts that will review consolidation and expansion in the turnaround market and reallocation of potential clients by size and industry.  This group will also discuss bankruptcy case sizes and the implications on staffing and length of engagements; the recent foray of accounting firms into the CRO role; and middle market consulting trends.

Panelists:

William Snyder, CRG Partners

Kevin Carmody, McKinsey & Company

Keith Cooper, FTI Consulting

John Dischner,  AlixPartners

Kent Laber, Conway MacKenzie, Inc.  

Meet these turnaround leaders and hear their thoughts on recent trends as they examine the economic and political impasse and its impact on restructuring opportunities. 

The conference will be held at the Grand Hyatt, Atlanta April 3-5. For more info, click here

Benefits of Community Outreach

It’s no secret that volunteering is great for communities, but less often do we hear about the multiple benefits to employees and companies that volunteering offers. From the personal to the professional, the act of volunteering provides a range of benefits to the recipients of the service, companies and volunteers alike.

CRG Partners discovered this first-hand during a recent volunteer partnership with Common Ground Relief in New Orleans. Our team contributed their skills, time and energy toward the goal of rebuilding communities devastated by natural disasters.

Volunteer projects offer a natural way to incorporate team-building exercises with giving back to the community. According to an article in “The New York Times,” rather than holding off-site meetings that focus on rope courses or retreats that feature days spent on a golf course, more and more companies are turning to hands-on volunteering as a more effective way to create team cohesion.

In fact, participation in volunteer activities tends to forge bonds between employees and a sense of camaraderie that lasts long after the project is completed.

But that’s not the only benefit; a 2004 study by Cone Corporate Citizenship found that consumers preferred to patronize companies that were active in the community. Of the American consumers polled, 86 percent said they would be likely to switch to a brand that was associated with a philanthropic cause.

A reputation for good corporate citizenship can benefit employee recruitment and retention, as well. When learning and leadership training is accompanied by activities that giving back to the community, employees develop a positive attitude toward their employer and a sense of loyalty.

On a personal level, volunteering offers a range of health and social benefits. Research shows that, when compared to non-volunteers, volunteers tend to experience:

 - Greater sense of satisfaction with life
 - Increased levels of self-respect
 - Less depression and anxiety
 - Improved health self ratings
 - Lower mortality rate
 - Increased sense of social solidarity
 - More social interactions
 - Better occupational achievement

With all of the benefits that volunteering offers to communities, employees and companies, it’s not surprising that more and more businesses engage in community-focused projects: CRG Partners is no exception.

CRG Partners recognizes that healthy companies cannot exist without healthy communities and that employee involvement is a critical component of this relationship. CRG is honored to provide support through our greatest asset – our people – through projects like the partnership with Common Ground New Orleans.

William Snyder due to speak at ACG Dallas/Fort Worth March Madness

Strikes, Foul Balls and Screwballs: An Insiders view of the Rangers Bankruptcy Auction

An insider view of the Texas Rangers Bankruptcy Auction presented at the ACG Dallas/Fort Worth March Madness breakfast featuring:  

William Snyder, Managing Partner, CRG Partners

Judge Russell Nelms, U.S. Bankruptcy Court, Northern District of Texas

Get the inside scoop on the Texas Rangers deal!  This was an especially tricky engagement to navigate given all of the additional stakeholders in a sports franchise, not to mention the fans with strong opinions on who should become the new owners! With the bankruptcy involving a baseball team poised for a run at its first World Series berth, the media coverage intensified and quickly jumped from the business pages to the sports pages, to front page news.

The program will be held at the Belo Mansion, Thursday, March 22. For more information, click here

Four indicators that you need to hire a Chief Restructuring Officer

When an airplane gets in trouble one pilot flies the plane and the other fixes the problem.   If both pilots try to fix the issue, the plane may crash.   This analogy can be used when describing a company that finds itself in financial distress.   Management needs to run the company better than ever when it is going through a tough period.  Unfortunately, distractions from anxious banks, trade vendors, customers and employees can consume the time of the management when the basic operation needs attention the most. 

To avoid a crisis situation, management should evaluate these four warning signs to determine if they should consider hiring a Chief Restructuring Officer “CRO”:

1. Liquidity issues.  Senior lenders  squeeze the company by reducing advance rates, incorporating lending blocks, and demanding borrowing bases more often which can cause the dreaded “death spiral” where the company cannot buy goods, cannot ship goods and worst of all, cannot make money.   Many times this is the only way a senior lender can send a message to management to get help, now.  CRO’s are extremely skilled at managing short term cash and dealing with members of the capital structure to build a bridge to a solution.   Many times the only money to be had is from people familiar with the situation and already on the line.
2. Pressures from members of the capital structure cause disruption and distraction.  Lenders who are junior to the senior debt, but have cross default provision lenders insert themselves into the situation trying to assess if they are on the “bubble” and are now the fulcrum lender.  This can cause endless data requests and meetings that consume the time of management.   A core competence of a CRO is their ability to develop a communication strategy to deliver a message that make the lenders feel comfortable and in the loop.
3. Trade vendors are restricting terms and squeezing cash.  Trade creditors can have a very different outlook on the situation than the lenders.   They typically have long standing relationships and enjoy much greater margins than the lenders do.   Knowing how to successfully execute a creditor composition if necessary is a critical skill of a CRO.   It’s very hard for management to say “I cannot pay you” when they asked the goods to be shipped.   A third party is a fresh face and can deal with the vendors in an objective fashion.  
4. Management defects.  When a company is in trouble, key management leaves creating holes that must be filled quickly with experienced management that can be immediately effective.   A good rule of thumb is that it normally takes six months for a senior manager to hit their stride.  In a turnaround, milestones are measured in days and weeks not months.   A company cannot wait for a manager to get comfortable with the situation before making a decision.   The lenders will tolerate mistakes, they will not tolerate indecision.  Filling key management positions to get immediate traction is a vital skill CRO’s have.

Managing expectations may be one of the most important skills in the first few weeks of a turnaround and CRO’s possess skills that have been honed over time in very heated situations.  They have been in dozens of tough situations and know what to say and to whom.  The three most valuable resources in a turnaround are people, time, and money, usually time is short, money is scarce and management is preoccupied with wild fires.  A CRO brought in early can prevent a bump from turning into a mountain.

Gene Baldwin due to speak at the Franchise Finance Conference

Working Through Franchisee Challenges That Affect the Bottom Line

This knowledgeable panel will be discussing some of the leading challenges that franchises face today.

• Negotiating franchise store closures
• How do you handle renegade franchisees?
• How to handle financially challenged franchisees

Panelists include:

Randy Evans, Shareholder, Monroe Moxness Berg PA

Ryan Palmer, Shareholder, Monroe Moxness Berg PA

Gene Baldwin, Partner, CRG Partners

David Grossman, President, Renue Systems, Inc.

 

The Franchise Finance Conference will be held March 6-7, 2012 in Las Vegas, for more infomation click here.

    

Joining together to make a difference

At the end of last month, CRG Partners gathered in New Orleans for our annual internal conference.  This is the one time of year that members of the firm come together from across the country to participate in educational sessions, leadership meetings and planned team-building exercises.  For many, it is the only time that they get to visit with their colleagues outside of an engagement.

This year was different.  While we still had meetings, listened to speakers, participated in panel discussions and enjoyed evening activities we also included an event centered on contributing to the local community that played host to our conference.  As New Orleans was so badly devastated by Hurricane Katrina, there is still much work to be done.  After doing a little research, CRG decided to partner with the volunteer run not-for-profit organization, Common Ground Relief (CGR), www.commongroundrelief.org. 

Keep in mind that as consultants, not all of us are “do-it-yourselfers.”  Many of us possess a specialized talent to ‘build and restore’ but aren’t necessarily handy with our hands unless we working on a computer or a blackberry.  However, what we did have was a great enthusiasm to volunteer to do whatever we could. 

As much of the indigenous forest in the NOLA area was killed when the saltwater from the storm invaded the marshland, CRG Partners was charged with planting cypress trees. While this may not sound too difficult, simply getting the trees to the planting site was not an easy task. Team members had to slog through 15 feet of thick bamboo growth and more than 50 yards of sometimes knee-deep mud and dense tall grass just to reach the planting site.

In order to scout out the best routes through the muddy bamboo and grass jungle and identify appropriate planting sites, CRG Partners organized themselves into two groups and worked together to develop the most effective methods of hauling, digging and planting.

What I found fascinating was that within each group, teams formed naturally and collaborated to develop their own methods and processes to haul plants to desired locations, dig and plant.  I see this with the work we do with our clients every day.  When we start an engagement we begin by assessing the project and defining the goals & objectives.  Once we identify what in the process could be improved upon, we assign specialized talent, focus the energy and develop best practices to reach common goals. CRG’s work in the marshlands was a striking parallel to how our teams collaborate with clients.  

Though the effort was initially designed as a simple community service project -- and a chance for the volunteers to get outdoors and do something physical after being in meetings all week -- the project naturally evolved into an extremely effective team-building exercise.  We planted approximately 600 cypress trees in the wetlands that morning while demonstrating the power of teamwork, best practices and the gift of volunteerism.    

A turnaround consultant’s view on JC Penny’s rebrand – Part 2

Clearly, JC Penny has substantial brand equity with the american consumer. Like many older retail and restaurant brands, it has been in decline for several years and brand repositioning has been tried several times. 
From a turnaround professional’s point of view I would have the following questions if I were on the Board:

 

1. Why are we rolling out this strategy in such a hurry without the benefit of customer research or testing? With the CEO on the job for only 90 days there cannot be any hard evidence how customers will respond positively to these initiatives. There is no imminent financial crisis looming that would create the need to roll out the new strategy without any testing.
2. Are we managing expectations properly at the start of this new pricing initiative? Without the “heroine” of nonstop promotions, sales are likely to be lower in the short run. In addition, it may take a while for customers to understand and respond to the new pricing strategy. The good news is that advertising expense will be much lower and salary costs will be reduced since there will be fewer people needed in the marketing department to create, produce and place advertising. The net effect may be that net cash flow and profitability will not decrease that much. Without market testing, it is impossible to tell exactly what will happen.
3. Who are our core customers? Mr. Johnson indicated in his rollout announcement that “We want to be the favorite store for everyone, for all Americans, rich and poor, young and old”.  Going after the whole population is a bold approach. To start the initiative, JC Penny should go after the customers they currently have and get them to come more frequently and spend more when they come.
4. What are our core markets? The vast majority of JC Penny stores are in suburban malls and mall traffic has not increased in years. A number of the stores are in secondary and tertiary markets and many may be in need of repair and refurbishing. JC Penny should decide what markets hold the keys for their success and concentrate their efforts and capital expenditures in those markets. It is just not possible to be all things to all people in all markets – especially if you are tied to suburban malls.
5. What training programs are we putting in place to retrain our employees on this new strategy and culture? Further, have we matched our incentive compensation plans for operators to match the goals and objectives of the new strategy? It is pretty obvious that the best strategy in the world will not be successful without proper execution from the line operators. With only 90 days to prepare, it seems unlikely that all the operational issues and incentives have been adequately addressed.

The new management team at JC Penny is in the process of implementing a “bet the farm” strategy with only 90 days of preparation. The Company is putting over $1 billion of EBITDA and the jobs of 150,000 people at risk with this move.  I have seen a mature restaurant chain with seasoned management team roll out a dramatic change in its customer experience and value proposition within a short period of time without adequate testing – and results were not pretty. I sincerely hope JC Penny has more success with their strategy.

 

A turnaround consultant’s view on JC Penny’s rebrand – Part 1

 

PUSHING THE RESET BUTTON AT 

  

After three months on the job as CEO at JC Penny, superstar retail professional Ron Johnson rolled out a comprehensive strategy to turnaround the fortunes of the famous retail chain founded by James Cash Penny in Wyoming 110 years ago. It all makes sense to me – on paper that is. 

Significant elements of the plan include the following:

• Completely revising the pricing and promotion strategy to dramatically reduce the amount and frequency of discounting. More than 70% of the JC Penny merchandise has been sold at a discount of 50% or more.