The Next Chapter – Issue 1
Welcome to the first edition of The Next Chapter! We are pleased to bring you Gavin/Solmonese’s quarterly newsletter, offering an inside look at the latest news in the corporate turnaround, M&A and bankruptcy worlds, as well as insights from our newly added enterprise enlightenment and public affairs practice.
In each issue, we will touch upon the current legal and market trends affecting businesses, notable M&A activity, high profile Chapter 7 and Chapter 11 bankruptcy cases, and key corporate and client initiatives driving our growing business to date. We will also take one section of the newsletter to ‘brag’ about our tremendous, dedicated Gavin/Solmonese team members, whose talents are worthy of the spotlight.
This issue features Ted’s analysis of the well-documented Hostess bankruptcy and reflections on the one-year anniversary of Gavin/Solmonese. Joe explains the unique Benefit LLC capital raising structure for the home of the National LGBT Museum, of which Gavin/Solmonese is the fiduciary. Managing Director Wayne Weitz shares news of recent litigation the firm just won in the Isle of Man – universalism in a cross-border insolvency case that could be a game-changer in the world of ‘safe havens.’ We share highlights of the recent ABI Spring Conference, as well as news from our team. And we hope you will enjoy learning more about Managing Director Tim Skillman, who works in our Los Angeles office.
We look forward to bringing you much more exciting company news and features as the year progresses, and we welcome your feedback. Stay tuned!
– Ted & Joe
ISLE OF MAN CHAPTER 11 CASE HIGHLIGHTS UNIVERSALISM VS TERRITORIALISM IN CROSS-BORDER INSOLVENCIES
by Wayne Weitz
When it comes to offshore jurisdiction, UNCITRAL’s Model Law, which has been adopted by the U.S. (through Chapter 15 of the Bankruptcy Code) and other countries, seeks to promote trade through a universalist approach to dealing with the issues that arise in bankruptcy and other insolvency proceedings. Challenges arise, however, when countries have not adopted a version of the Model Law for recognition of foreign insolvency proceedings and judgments, creating significant consequences and costs for creditors and stakeholders.
Gavin/Solmonese’s Wayne Weitz serves as Chapter 11 trustee in the bankruptcy case of Waste2Energy, which includes four companies — two incorporated in the U.S. and two incorporated in the Isle of Man. A recent insolvency court decision in the Isle of Man concerning this business revealed that offshore jurisdictions might be leaning toward embracing universalism, despite their historical territorialist tendencies.
Because the Isle of Man has not adopted legislation based on the Model Law, it was far from clear that it would recognize the United States proceedings or orders entered in those proceedings. In filing their request to wind-up one of the Isle of Man Debtors, certain insider creditors hoped to be able to obtain a priority claim to the intellectual property assets titled in one of the Isle of Man entities, thereby stepping ahead of all of the U.S. non-insider creditors.
The case was heard in the High Court of Justice of the Isle of Man and most significant was the judge’s decision to not exercise his jurisdiction, noting that the U.S. Bankruptcy Court for the District of Delaware was handling the matter quite appropriately. The Isle of Man court based its decision largely on the concept of universalism despite the Isle of Man lacking any legislation governing recognition of international insolvency proceedings.
The Waste2Energy decision represents a strong and clear indication that courts and practitioners in offshore jurisdictions see themselves as being part of a global community and are embracing universalism.
TED RELECTS ON OUR FIRST YEAR AS GAVIN/SOLMONESE
Oh, what a year it’s been! I still remember the day we announced the formation of our new firm and the acquisition of NHB Advisors in mid-April 2012. The email blast went out while I was being deposed in a fiduciary services case. Walking out of a long deposition to an incredibly touching and affirming chorus of support and encouragement from you — our peers, friends and colleagues in the professional community — was inspiring and energizing.
Since then, we haven’t stopped running. Our first post-announcement engagement by a creditors’ committee case came just a few weeks later with the iconic racquet sports manufacturer, Prince Sports. We followed that with successful representations in the oil exploration/production and gaming industries, trading technology, home construction, technology services and home and garden retail – in all, eight new committee engagements in our first year. We led expert witness engagements in management duties, valuation, solvency and both prosecution and defense of avoidance actions and fraudulent conveyance cases. We worked for troubled borrowers and their lenders to create and preserve value. We assessed troubled non-profit organizations both from their boards of directors and as outside experts.
We grew and increased the strength of our bench, adding industry-lauded expertise with valuation expert Boris Steffen in our Washington, DC office; Wayne Weitz in our Philadelphia and Wilmington offices and Tim Skillman in our Los Angeles office.
I started our first year being elected to the Board of Directors of the American Bankruptcy Institute and joined the board’s Communications and Information Technology Committee under the leadership of Vice President Jim Shea. Through this involvement, I try to pay back some measure of the benefit we’ve received from ABI’s breadth of offerings by working to improve and expand those services. We completed the work of the ABI National Ethics Task Force and I ended the year joining the ABI Civility Task Force.
Joe Solmonese completed his time at the Human Rights Campaign in July, having set the groundwork and the mechanism for what was an historic election night for millions of Americans, with ballot victories on measures lead by the HRC in Maine, Maryland, Washington and Minnesota. Joe also advised the campaigns that brought in last November’s historic presidential re-election win and Sen. Sherrod Brown’s landslide victory in Ohio.
Once the election season wound down, Joe continued building name recognition for our Public Affairs Strategies practice, with appearances on Starting Point with Soledad O’Brien and regular appearances on Hardball with Chris Matthews. Joe engaged with employee groups at market-leading organizations such as Comcast; spoke at the ABI Mid-Atlantic Bankruptcy Workshop on Gender and Diversity issues in professional services practice, and spoke at the Independent Sector Conference on The Art of Advocacy.
In many ways, the last year has seen us become a different firm than we once were – a stronger team; more intentional; with greater industry capabilities and a wider reach. And in important ways, we’re still very much the same – recognized industry experts, dedicated to doing excellent work; dedicated to the advancement of our profession and giving back to our communities; committed to our core values of integrity, client focus, the creation and preservation of value and, above all, respect – for our clients, for their stakeholders, for our people.
We owe the successes of the last year to you – our friends in the community who reached out to us; who shared our enthusiasm and who were enthusiastic to work with us. And we’re committed to paying that forward in the next year, and the years after that – with consistently excellent work for our clients and our friends in the professional community.
THE BENEFIT LLC AND THE NATIONAL LGBT MUSEUM – A NEW FUNDRAISING MODEL FOR NONPROFITS
by Joe Solmonese
In November 2012, we announced that Gavin/Solmonese had been engaged as the fiduciary advisor for the newly formed Oliver Grayson Holding Company, Benefit LLC that was established to raise capital for acquisition of a building for the National LGBT Museum in Washington, DC. What does this really mean, and what exactly is our role?
The establishment of the Benefit LLC means that The Museum, as a non-profit , will be able to attract investors (not just donors) who are philanthropically minded, and who by investing will have all of the rights and benefits of a shareholder of the building’s landlord. As Ted notes, ‘Housing a significant non-profit entity in a for-profit building, which creates a public benefit, is a win-win for everyone.’
This structure is the first of its kind for a museum. Other non-profits should take note of this innovative approach – it is scalable to any organization seeking innovative ways to achieve large-scale projects like securing real estate.
Ted serves as board chair of Oliver-Grayson, where he is responsible for advising in the project’s development, the recruiting of board members and oversight of the project’s documentation and capital-raising processes. Ted is also on the board of the Velvet Foundation, which is the non-profit organization behind the LGBT Museum. Joe is leading the capital raising process for Gavin/Solmonese and is project’s eyes and ears in the nation’s capital.
At the moment, the Velvet Foundation, led by executive director and chair Tim Gold, is focused on building its collection and searching for real estate in Washington, DC.
SPOTLIGHT ON: TIM SKILLMAN
What is your area of focus at G/S?
I am a Managing Director in Gavin/Solmonese’s Los Angeles office, where I provide change management advisory services and capital formation services to middle market, privately held companies, in the western United States.
My main industry focuses and areas of expertise are manufacturing, principally the supply chain for the automotive industry and other durable goods and appliances. I also specialize in financial services as an equity investor to financial start-ups and have done a lot of consulting work in the mortgage banking industry.
What aspect(s) of your work do you find most surprising, most enjoyable?
I continue to be surprised by management inertia. When businesses need to change, it is often the management team that is the last to recognize and accept the need to change. The most enjoyable aspect for me is creating value through improving processes and operational performance. This is the most gratifying aspect of my work at Gavin/Solmonese.
What’s your favorite charity?
I support lots of environmental concerns, including ground water contamination and research onto the North Pacific garbage patch.
How do you give back to your community?
I am a member of the Advisory Board for the City of Los Angeles Minority Business Development Agency. I have counseled, advised and financed minority businesses for most of my professional career.
What trade groups and other outside organizations are you involved with?
I am a member of the Turnaround Management Association (TMA), The Association for Corporate Growth, and the American Bankruptcy Institute (ABI). I am a past Director and officer of the Association of Certified Turnaround Professionals and the Michigan Environmental Trust. I am also on the Advisory Board of The Receivables Exchange, a New Orleans based virtual market for the financing of accounts receivable.
What are some of your major accomplishments/achievements of which you are most proud?
My involvement with start-ups is a personal achievement. In 2006, I started an asset based finance company with two partners and GMAC. It was a huge success. GMAC bought us out in 2011. Since then, I have been involved in two other start-ups, including the Receivables Exchange and DOOD Dog Food. Both of these businesses continue to enjoy great success.
In my consulting career, I am most proud of a successful turnaround for Focus:HOPE, a Michigan not-for-profit that trains inner city kids to be manufacturing engineers. Also, the reorganization of Flying J Corporation, which led to a successful exit from bankruptcy with all creditors being paid in full.
Most memorable client win?
DiTech.com, a mortgage origination company owned by GMAC.
What was your first job?
After completing the MBA program at the University of Michigan, I joined the National Bank of Detroit.
First concert or favorite concert?
Most recently, Kings of Leon at the Hollywood Bowl. Best concert ever attended: Goo Goo Dolls with special guest, Third Eye Blind.
Where do you live and where are you from?
I live in Los Angeles. More specifically, the hills above Lake Hollywood. I am from Southeastern Michigan.
THE RISE AND FALL OF TWINKIE THE KID
by Ted Gavin
Hostess Twinkies: Born 1947 – Died Christmas 2012. Much has been written, discussed, debated, blogged, tweeted and posted about all things Hostess in the last 15 months. After a fascinating series of unfortunate (and arguably avoidable) events, Hostess’ brands and facilities will soon be carved up, like an incredibly tasty Thanksgiving turkey of comedic health impact, and sold to a variety of bidders.
The tale of Hostess’ crash-stop in bankruptcy is familiar. The unsecured claims of the union pensioners have been fixed, the sale and auction procedures have been approved – now, it’s all over but for the auctioneer’s gavel and the hopes of 19,000 displaced employees that they might again have jobs. The chain of events that brought the venerable American snack-cake and bread maker to its sugary demise also led to what may, in retrospect, be called the most mutually destructive collective bargaining agreement negotiation in creme-filled history.
Soon the last loose ends of the bankruptcy will be over. But before we move on to the next it will all be over. So, now it is time to ask the existential question – what does it all mean?
In the end, a few things are clear
The Court has approved auction procedures to sell off the brands to different buyers – Wonder and its partner brands to one baker; Twinkies and some snack cakes to another; still more brands to Dolly Madison or a better bidder. But it is the tangential parties who will suffer. The customers who no longer experience economies of scale from purchasing an entire range of products from one bakery and will pay the price for that with, well, higher prices. The union rank and file who may or may not have jobs with new buyers. The back-office people and salespeople made redundant in the combination with new owners. The pensioners, whose last payments for medical care were made last month, left with unsecured claims. The Twinkies will live on, though – we can stop buying them on eBay.
GAVIN/SOLMONESE ROCKS AMERICAN BANKRUPTCY INSTITUTE SPRING MEETING
The recent American Bankruptcy Institute (ABI) Spring Meeting in National Harbor, MD, was a busy and memorable one for our team. In addition to attending, moderating and participating in the numerous sessions and panel discussions, we celebrated our one-year anniversary as Gavin/Solmonese at our conference kick-off dinner at McCormick & Schmick’s, surrounded by friends and family.
Other notable events included:
- Wayne Weitz, who serves as the Membership Relations Director for ABI’s Financial Advisors & Investment Bankers Committee, coordinated the First Annual Breakfast with the Judges event sponsored by that committee.
- Ted attended a reception on Capitol Hill for Sen. Chris Coons and other leadership members of the Senate and House Judiciary Committees with the ABI Board’s Executive Committee and members of the ABI Chapter 11 Reform Commission. The Chapter 11 commission’s work and issues of relevance to the elected officials were discussed.
- The Final Report of the ABI National Ethics Standards Task Force was presented by a panel comprised of its Chair, Vice-Chair, two Reporters and Ted Gavin, who was Chair of the Subcommittee on Committee Solicitation.
The conference ended with a final night dinner – sponsored by Gavin/Solmonese – the highlight of which was entertainment by Joan Jett & The Blackhearts
EVENTS, CONFERENCES, SPEAKING ENGAGEMENTS
Boris Steffen was recently named co-chair of the Appraisal & Valuation Subcommittee of the American Bar Association’s (ABA) Litigation Expert Witnesses Committee. In this role, Boris will be responsible for facilitating thought leadership, the exchange of ideas and educational opportunities pertaining to how the value of assets, liabilities, equity and other interests and claims might be determined within the context of litigation. A great honor – congratulations, Boris!
Joe Solmonese was the featured speaker at a recent employee affinity group meeting at Comcast’s headquarters in Philadelphia. OUT at Comcast, an internal group comprised of 170 LGBT and allied members, gave Joe a warm reception as he spoke to the group about advances in same-sex marriage and equality legislation, corporate diversity and inclusion past, present and future, and how Comcast and others can continue to lead the way in creating a diverse workplace.
Wayne Weitz, Sarah Pugh and Peter Hartheimer attended the Conrad Duberstein Moot Court Competition Dinner in New York City in March.
Ted Gavin moderated a panel of turnaround experts at an upcoming Risk Management Association (RMA) Philly event in Radnor, Pennsylvania, in March. The event was titled, ‘Portfolio Management: Identification, Mitigation and Liquidation,’ and the panel topic was “Best Practices and Regulatory Expectations.”
Gary Adelson and Tim Skillman attended ABI’s Bankruptcy Battleground West in Los Angeles March 22-23.
Ted, Joe, Wayne, Boris, Peter and Sarah attended and participated in the ABI Spring Conference in National Harbor, MD in April.
Tim Skillman moderated a panel entitled,’ Financing that Fits’ at the 18th annual Minority & Small Business Conference in Los Angeles. The panel discussion covered best practices for minority and small business to finance and obtain sources of capital to maximize their business
Ross Waetzman served as a panelist at the National Association of Credit Management’s (NACM) Credit Congress & Exposition in Las Vegas May 19-22. Ross’ panel topic was “Recognizing a Financially Distressed Customer.”
GAVIN/SOLMONESE IN THE NEWS
- Wayne Weitz was featured in a Dow Jones Daily Bankruptcy Review article regarding G/S’s recent offshore jurisdiction win in Isle of Man bankruptcy court.
- Gary Adelson was quoted in a Fox Business online article regarding JCPenney’s restructuring.
- Boris Steffen was quoted in Turnarounds & Workouts regarding the 2013 outlook.
- Tim Skillman was quoted in a Reuters article which detailed Detroit’s search for an emergency financial manager to turn around the city’s sharp decline.
- Joe Solmonese was quoted in a Baltimore Sun article regarding the National LGBT Museum.
- Ted Gavin wrote two articles about the Hostess bankrupcty; those appeared in ABL Online and the ABF Journal. Ted also wrote an article regarding nonprofit board governance for the Philadelphia Business Journal.
- Wayne Weitz was quoted in several publications regarding the Isle of Man bankruptcy case, including Dow Jones Daily Bankruptcy Review, Turnarounds & Workouts and a bylined article in ABI Journal. Wayne was also quoted in a Wall Street Journal article regarding the Dewey law firm bankruptcy.
- Joe Solmonese appeared on Hardball with Chris Matthews twice this spring and was also on Starting Point with Soledad O’Brien.
- Luke Snyder published an article about the 13-week cash-flow plan in the May/June issue of ABF Journal