The Next Chapter – Issue 2
Welcome to the second edition of The Next Chapter, Gavin/Solmonese’s quarterly newsletter. In each issue, we offer an inside look at the latest news in the corporate turnaround, M&A and bankruptcy worlds, as well as insights from our enterprise enlightenment and public affairs practice.
It has been a busy summer at Gavin/Solmonese, and the pace seems to be continuing into the fall. We were engaged in 11 bankruptcy cases in the last six months, including Oreck, Saab Cars North America and Exide. Steve Kunkel and Adam Kaplan joined the firm in our new Chicago office, broadening our firm’s offerings to borrowers, creditors and stakeholders.
This issue features Luke’s endorsement of the 13-week cash flow; Joe’s analysis of what the Supreme Court’s recent DOMA ruling means for businesses; news about our new Chicago office, plus links to numerous articles that our prolific team members have either written or are quoted. We also hope you will enjoy learning some surprising facts about Managing Director Boris Steffen, who is profiled in our Spotlight.
– Ted & Joe
The 13-Week Cash Flow – Keeping Your Eyes On The Road & Your Hands On The Wheel
by Luke D. Snyder
Entrepreneurs often demonstrate unbridled optimism with respect to future sales forecasts. It is understandable that business founders and key management are often more positive about a situation than an objective third party due to the blood, sweat, and tears they invest in the business daily. However, this optimism can very quickly cause — or exacerbate — a cash flow crisis that puts survival of the business at risk. A well-crafted 13-week cash flow model (TWCF) serves as a reality check for all stakeholders and highlights a logical path forward.
The cash cycle in many businesses approximates 90 days (i.e. – one calendar quarter or 13 weeks) which means an experienced turnaround consultant will appear to have a crystal ball when mapping out short-term cash flows, because all the necessary data is available if one simply knows how to compile it. While every situation and industry is unique, the focus here is on a process that can be used in any situation, particularly one where there is no source of financing other than the cash generated by the business.
A well-developed TWCF, monitored on a weekly basis will provide all stakeholders visibility to the near term survival of a company that traditional accrual-based financials based on overly optimistic sales projections simply will not. A TWCF is the industry standard reporting tool in a distressed situation. Experienced turnaround consultants don’t have crystal balls and we don’t walk on water – instead, we know how to formulate cash flow models and we know where the rocks are. That’s how an experienced turnaround consultant can help navigate this process.
For more specifics on how to set up and maintain the TWCF, click here to read more details in this article that was originally published in the ABF Journal.
DOMA Ruling’s Implications For Companies and Employees
by Joe Solmonese
The Supreme Court’s recent decision to strike down the Defense of Marriage Act (DOMA) as unconstitutional was perhaps one of the hallmark moments in this country’s inevitable march toward full marriage equality. It is a move that will have significant consequences not just for same-sex couples in this country, but also for American corporations. And those companies that have been ahead of this cultural curve, who have made an effort to provide an equitable experience for their LGBT employees, will be best suited to meet some of the changing requirements that DOMA repeal will likely require. At Gavin/Solmonese, we’ll be working with our clients to ensure that they are able to successfully navigate this changing public policy landscape.
Currently, 13 states and the District of Columbia recognize same-sex marriage. Prior to the repeal of DOMA, the federal government did not. This created real complexity for corporations based in a number of states. How should things like domestic partnership benefits be conveyed from state to state as there was no parity in relationship recognition? How do we convince an employee who is married in one state to move to a state where his or her marriage would no longer be recognized? How do we create a fair and equitable work environment when same-sex couples are unfairly taxed for their healthcare benefits in a way that others are not?
The court’s decision to strike down DOMA essentially means that, now, many government agencies will begin conveying or recognizing federal benefits to individuals in states where marriage is legal. In some cases, agencies may allow individuals who go to those states to be married the opportunity to carry those benefits back with them to states that do not yet recognize full marriage equality. Numerous government agencies are sorting through these details now and will be over the coming months. And while this is all ultimately historically important news for same-sex couples in this country, it will become increasingly complicated for companies to ensure that they are complying with both state and federal law.
The complex ways in which the Administration works this out – and the added complexity it creates within corporate America – will likely set the stage for the final push to legalize same-sex marriage all across this country. Until then, we will work to provide the resources and the insight we are uniquely positioned to offer.
SPOTLIGHT ON: BORIS STEFFEN
What is your area of focus at G/S?
The focus of my practice at G/S is on providing financial and strategic advice and expert testimony to assist law firms, financial institutions, industrial corporations and government agencies in managing and resolving accounting, finance, valuation and solvency related disputes that arise within the context of corporate restructurings, mergers and acquisitions.
What aspect(s) of your work do you find most surprising, most enjoyable?
Most of all, I enjoy having the opportunity to work on challenging, complex issues, across a wide variety of businesses and industries, and in the process make a meaningful contribution to the success of our clients, while being exposed to and learning new things.
What’s your favorite charity?
My favorite charities include Habitat for Humanity, The National MS Society, Cycle for Survival, Salvation Army and Goodwill. (Additionally, our firm is active in Cycle for Survival, which was started by a friend of Gavin/Solmonese, since 2011 – and we’ve fielded a team for the last two years).
What trade groups and other outside organizations are you involved with?
I am a member of the American Institute of Certified Public Accountants, American Society of Appraisers, American Bankruptcy Institute, American Bar Association, Association of Insolvency and Restructuring Advisors and Insol International.
I currently serve as Co-Chair of the Appraisal & Valuation Sub-Committee, Expert Witness Committee, Section of Litigation, of the American Bar Association.
I am also very involved with and play trumpet for the American Bankruptcy Institute’s band, ‘The Indubitable Equivalents.’
What are some of your major accomplishments/achievements of which you are most proud?
While still a high school student, I entered a national competition to perform as featured guest trumpet soloist with the United States Navy Band at Constitution Hall in Washington, DC. I won the competition and performed La Virgen de la Macarena, arranged by trumpet virtuoso Rafael Mendez, to a capacity audience. Shortly thereafter, I began playing professionally, working with performers including Steve Allen, Lucille Ball, Milton Berle, Bill Cosby, Sammy Davis, Jr., Mitzi Gaynor, Bob Hope, Michael Jackson, Henry Mancini, Barry Manilow, Johnny Mathis, Liza Minnelli, Donna Summer, the Temptations, Mel Torme, Frankie Valli & The Four Seasons, Andy Williams, Richard Burton, Rex Harrison, Carol Channing and Lauren Bacall. Since then, my transition to where I am today with Gavin/Solmonese has been an amazing adventure!
Most memorable client win?
The first case in which I testified was on behalf of the Federal Trade Commission in a preliminary injunction proceeding opposing the merger of Staples, Inc. and Office Depot, Inc., which was the very first case in which the merger efficiency defense was litigated. The Commission prevailed in the case, and the decision remains a cornerstone of merger analysis and enforcement to this date.
What was your first job?
First concert or favorite concert?
The first concert I attended was to see Doc Severinsen & The Now Generation Brass. I’ve been to many concerts since then, and have enjoyed them all equally (self-selection bias!).
Where do you live and where are you from?
I currently live in Ashburn, Virginia. I grew up in the suburbs surrounding Chicago, Illinois.
Upcoming industry events or speaking engagements you’re involved in?
On September 26, 2013 and 27, 2013, I will be co-teaching a seminar on valuation in international arbitration at the American University Washington College of Law.
WELCOME STEVE AND ADAM!
Please join us in welcoming our two newest Gavin/Solmonese team members, who officially opened our Chicago office in August – Steve Kunkel and Adam Kaplan. Steve joins us as Managing Director, Adam as a Consultant. Steve has more than 30 years of executive practitioner, operational and restructuring expertise. He brings to Gavin/Solmonese years of operational experience on the corporate side, which gives him a substantive understanding of financial and debtor challenges, and thus a valuable perspective for our clients.
Steve has held permanent leadership positions at large international, publically traded corporations (and smaller enterprises, as well), including Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, and has served on a number of boards of directors, including serving as chairman and on compensation, capital budget, and audit committees, including the boards of Ames/Axia Corporation, Kil-Bar Engineering, Tenatronics, Sterling Electronics, and Crownline Boats, among others.
He joins Gavin/Solmonese from GlassRatner Advisory & Capital Group in Chicago, where he was a senior managing director.
Adam most recently worked as an Associate at GlassRatner Advisory & Capital Group in Chicago. Previously, Mr. Kaplan was an intern in currency trading at the University of Trading, Chicago Board of Trade. He is a graduate of the Inter Disciplinary Center Herzliya in Herzliya, Israel. Kaplan also attended University of Tel Aviv and American University.
EVENTS, CONFERENCES, SPEAKING ENGAGEMENTS – Where We’ve Been
Joe Solmonese served as keynote speaker at the Metropolitan Business Association of Orlando (Gay and Lesbian Chamber of Commerce) Pride in Business Awards Gala in April. The event honored Central Florida’s LGBT and Allied business leaders.
Wayne Weitz attended the Turnaround Management Association’s (TMA) Mid-Atlantic Symposium held at Revel in Atlantic City, where he was also on the Symposium Executive Committee, responsible for the symposium’s keynote speaker, Stacy Keach.
Ted Gavin represented Gavin/Solmonese at the American Bankruptcy Institute’s 20th Annual Northeast Bankruptcy Conference held in July at Newport, RI and the ABI’s 18th Annual Southeast Bankruptcy Workshop held in July in Amelia Island, FL. The events featured educational sessions on a wide variety of timely bankruptcy related topics, as well as the chance to network with top-notch industry professionals.
Ted Gavin attended sessions at the American Bankruptcy Institute’s (ABI) 20th annual Central States Bankruptcy Workshop in Traverse City, MI in August. The Friday night dinner featured a special performance by the ABI band, Indubitable Equivalents, which includes G/S team members Boris Steffen on trumpet and Ted Gavin on rhythm guitar and the occasional rare backing vocals.
The Gavin/Solmonese team descended like a marauding horde upon the 9th Annual Mid-Atlantic Bankruptcy Conference held at The Hotel Hershey in August. In addition to the networking opportunities available, this event brought together the region’s best speakers covering all topics to weather the changes in this current economic climate.
Ted Gavin and Ross Waetzman attended the American Bankruptcy Institute’s 21st anniversary Southwest Bankruptcy Conference (August 22 -24). The conference featured a keynote on the work of the ABI Chapter 11 Reform Commission from ABI’s President-Elect, Brian Shaw, of Shaw Fishman Glantz & Towbin LLC.
EVENTS, CONFERENCES, SPEAKING ENGAGEMENTS – Where We’ll Be
Boris will teach a two-day seminar at American University’s Washington College of Law on “Understanding Damages and Compensation in International Commercial and Investment Arbitration,” September 26-27.
Joe is serving as a panelist at the Independent Sector’s 2013 Public Policy Action Institute conference in New York on September 29. He will be discussing the ‘Blueprint for Advocacy Excellence and Messaging Effectiveness.’
Ted, Tom, Stan and Wayne will accept the TMA’s Transaction of the Year Award for the Small Business Category on October 5, at the TMA’s 25th anniversary annual conference in Washington, DC.
Ted and Wayne will attend the National Conference of Bankruptcy Judges annual conference in Atlanta on October 31. Ted will serve on a panel as part of the Commercial Law League of America’s Honorable Frank W. Koger Memorial Education Program: Current Developments in Hot and Emerging Areas of Bankruptcy. He and his fellow panelists will discuss the status of Bankruptcy Rule 2014, including proposed amendments recommended by the ABI National Ethics Task Force (of which Ted was a member), ethics issues arising in recent mortgage cases, and issues raised in the I Taylor and GSC Group cases. The panel is entitled, “The Evolving Bankruptcy Prohibition Against Opaqueness.”
Ted, along with bankruptcy judge Nancy Rapoport, will conduct a panel discussion at the American College of Bankruptcy in Minneapolis in November.
Joe, Ted and Wayne will attend the ABI Winter Leadership Conference in Rancho Palos Verdes, CA, December 5-7.
Ted will speak on two panels at the National CLE Conference in Vail, CO in early January 2014. The first topic is ‘Advanced Financial Issues in Reorganization – Wisdom from Our Turnaround Professionals,’ and the second panel will discuss ‘Creditor Committee Representation Issues: Standing to Pursue Estate Causes of Action, SPM Gifts, Claims Against D&Os and Lenders.
GAVIN/SOLMONESE IN THE NEWS
- Joe appeared on ‘Hardball with Chris Matthews’ discussing Jason Collin’s coming out announcement as a gay pro sports NBA athlete and what it means for the broader equality movement.
Ted wrote an article that appeared in the June issue of the ABI Journal, which discussed implications for post–confirmation trust litigation in Ch. 11 bankruptcy cases, and in particular, the issue of state court vs. bankruptcy court in the case of Washington Mutual.
- News of Wayne’s promotion from Senior Director to Managing Director appeared in the ABF Journal, ABL Advisor and Bankruptcy Week.
- Ted was quoted in a Dow Jones Daily Bankruptcy Review article entitled, “For CROs, The ‘R’ Stands for Restructuring… And Risk,” which discussed the recent NLC Financial Services LLC case, and the landmines that CROs potentially face as they navigate their companies back to health.
- Joe was quoted in the Boston Herald discussing the anticipated Supreme Court rulings on DOMA and Proposition 8.
- Joe appeared on NPR’s live radio show, Here & Now, in Boston discussing what’s next for the gay rights movement following the Supreme Court’s repeal of DOMA and overturn of Proposition 8.
- Boris wrote two articles that ran in Law360 in August. The first, entitled, “Appraisal Rights Redux: Resurgence, Trend or Afterthought?,” described how recent court decisions, actions by market participants and changes in the structure of the merger and capital markets, suggest potential benefits of an appraisal action that may significantly outweigh costs in an increasing number of cases. The second article, entitled, “It Ain’t Over Til It’s Over,” analyzed the merger between American Airlines and US Airways as a strategic tactic for American Airlines to exit Chapter 11 bankruptcy. He also outlined several considerations and models of defense that could potentially move the merger forward, despite initial opposition from the U.S. Department of Justice.
- Ted wrote an article outlining his proposal for mitigating Detroit’s bankruptcy crisis, entitled, “It’s Never Sunny in Detroit: An Only Slightly Less Modest Proposal for a Troubled Metropolis,” which appeared in the ABL Advisor in late August.