HBS Panel Recap
Date November 2014
On Friday November 14th Harvard Business School hosted thought leaders within the restructuring community to share insight on industry trends and developments. Keynote speakers included Stephen Toy, Senior Managing Director and Co-Head, WL Ross & Co., as well as F. Peter Cuneo, Managing Principal of Cuneo & Company and Former CEO of Marvel Entertainment. The event also featured a panel of leading experts in the field to speak on Turnaround Advisory and Management, including Gordon Brothers Group’s Robert Himmel, Co-President of the Commercial & Industrial Division. The panel was moderated by Howard Brownstein, President & CEO of The Brownstein Corporation and also featured Patrick Lahaie, Principal at McKinsey Canada, John Monaghan, Partner at Holland & Knight and Mark Weinsten, Senior Managing Director at FTI Consulting.
The panelists took turns reflecting on challenges and successes throughout their careers in the turnaround industry. Their comments included war stories from the restructurings of American Apparel, XL Shipping & Logistics, a Canadian mineral mining company and U.S. Mortgage. As the conversation turned to Himmel he recounted the successful turnaround story of F&F Foods, a manufacturer of candies, mints and lozenges under several well-known brand names, including Smith Brothers ®.
In 2009, the company was unable to obtain additional financing from its existing lenders due to a restrictive forbearance agreement. Himmel and the Commercial & Industrial team evaluated the company and identified underlying enterprise value, despite the company’s lack of capital and credit availability. The company’s brand portfolio, unique manufacturing profile and the real value of the leveraged assets held promise.
Gordon Brothers Group acquired the senior debt and, with shareholder support, placed the company into Assignment for the Benefit of Creditors and appointed interim management personnel. Gordon Brothers Group provided working capital to fund F&F’s regular operations while closely monitoring all major financial decisions and expenditures. The team identified untapped value in the Smith Brothers brand and expanded its distribution, resulting in higher margins and ultimately, increased revenues. Gordon Brothers Group also provided additional growth capital to support the purchase of equipment necessary for the company’s entrance into a new product category, allowing the company to expand its offerings and customer base. Following the successful turnaround of the business, Gordon Brothers Group sold its senior debt position in support of a going concern sale of all of F&F’s assets to York Capital.
Through the restructuring process, the company reversed a significant operating loss to an 11% EBITDA profit margin. Hundreds of jobs were preserved and many more have been created over the past few years as the company has continued its growth. York Capital has invested another $10 million to further expand operations and market the Smith Brothers brand. Over the coming months these products will be rolled out to major drug chains across the U.S., including Walgreens and Duane Reade.
Himmel noted that this was but one of many such turnaround stories, including those recounted by the other panelists. These reflections were followed by questions from the audience, which included student members of the Turnaround Club. Their comments centered on entering the industry and what skills lead to success in the field. The panelists agreed that having the ability to ramp up quickly and flexibly transition skills across multiple disciplines and industries is crucial. New opportunities present themselves in different areas at all times and for a range of reasons. Being able to jump in at a moment’s notice and work effectively with partners—qualities the panelists all share—will undoubtedly lead to success in the ever-changing field of turnaround management.