Distressed Distressed Downturn Downturn Liquidity Liquidity SCertificationolutions ........... SCertificationolutions ........... Hedge funds Hedge funds Education Education Lenders Lenders 2007 Annual Report Credit Credit Economy Economy Distressed Distressed Downturn Downturn Liquidity Liquidity Certification Certification Webinars Webinars Investors Investors ..........Debt ..........Debt Membership Membership Lenders Lenders Issues Focused Credit Credit Economy Economy Distressed Distressed Member Centered Downturn Downturn Education Education Globally Engaged ...........Hedge funds ...........Hedge funds Debt Debt Certification Certification Opportunity Opportunity Investors Investors Conferences Conferences agility Credit Credit Education Education Downturn Downturn Distressed........... Distressed........... Liquidity Liquidity SolutionsCertification SolutionsCertification Hedge funds Hedge funds Opportunity Opportunity ...........Investors ...........Investors Debt Debt Strategic 150 S. Wacker Drive, Suite 900 Strategic Economy Chicago, IL 60606 Economy T 312.578.6900 Credit F 312.578.8336 Credit Conferences Conferences Conferences Credit Economy Distressed Downturn Contents Liquidity Solutions Business Highlights 2007..............2 Hedge funds International Chapters..............4 Education Lenders Credit The dynamic restructuring market tested the North American Chapters..............8 Distressed Downturn Turnaround Management Association’s ability to stay Liquidity Certification Communications..............22 during 2007. Investors ahead of the curve Rising oil Membership..............23 Debt Opportunity prices, a sudden mid-year credit crunch, and a Lenders Credit Cornerstone..............24 plummeting real estate market put the “R” Economy Distressed Downturn Education..............28 word on the tip of everyone’s tongue. An up-cycle for Education Hedge funds the seemed on its Annual Convention..............30 corporate renewal industry Debt Certification way. But what form would it take? A major shift in the Opportunity Awards..............27, 32-33 Investors Conferences restructuring world made vigilance and agility Credit Moving Forward..............34 Economy the watchwords of the year. Education Downturn Financial Report..............36 Liquidity SolutionsCertification Hedge funds 2007 TMA International Board of Directors..............37 Opportunity Investors Debt Strategic 1 Brazil Weak U.S. Dollar Corporate Renewal 2007 Chapters Easter Europe Business Highlights “Every morning in Africa, a gazelle wakes up. It knows it must run Subprime knock down China faster than the fastest lion or it will be killed. Every morning a lion During 2007, many of the financial Hong Kong services firms were hammered from Licensing wakes up. It knows it must outrun the slowest gazelle or it will mortgage-related losses, with double- starve to death. It doesn’t matter whether you are a lion or a digit declines and a cumulative Emerging Markets market value drop of $319.8 billion. Educational gazelle. When the sun comes up, you better start running.” Percentage of decline from their Growth From The World Is Flat by Thomas Friedman ......... 2007 peak to the second week in January 2008 Debt Two thousand and seven began with no skip in the beat of an economic E-Trade Financial Corp. -89% Certification cycle still riding high. The stock market was up. Growth was above-par. Deal Opportunity 2007 Countrywide Financial Corp -86% Brazil flow moved at a swift and steady pace propelled by abundant credit and Washington Mutual Inc. -69% Weak U.S. Dollar widening influence of international players. Mergers and acquisitions hit a Bear Stearns Cos -58% Merrill Lynch & Co. -49% record. Corporate debt remained seemingly default-proof. Profits boomed. Expansion Citigroup Inc. -49% Morgan Stanley -47% International Bankruptcy Abuse Prevention and Lehman Brothers Holding Inc. -33% Chapters Then it happened. Source: Chicago Tribune, January 12, 2008 Consumer Protection Act (BAPCPA), pro- Easter Europe Halfway into the year, the subprime fessionals adjusted to the new norm of At least 20 mortgage lenders mortgage lending market caved, and all China out-of-court restructurings. Through the have declared bankruptcy since Hong Kong those complex securities packages backed December 2006. US foreclosures easy credit years, firms diversified their by assets that included mortgages no set a third-quarter record. Licensing services to build a broader client base. Source: Bloomberg Emerging Markets longer were airtight. The housing Educational market’s deep funk spread as mortgage Trickle-down: The crisis in the Within TMA, membership grew as defaults spiked, home values plummeted, housing market has caused pain and Growth chapters made new alliances with other suffering to secondary industries: fur- Investors and foreclosures spread. Even old guard niture, home furnishings, housing . ...... professionals, successfully communicated Russia investment houses could not disentangle products, lumber companies. the breadth of their skills, and estab- Household names like Bombay Co., themselves from the mess, and chiefs at India lished new outposts around the globe. Levitz Furniture, and Sofa Express Merrill Lynch & Co. and Citigroup, Inc., have filed for bankruptcy. Top 10 U.S. Business Stories of 2007 Whatever looms in 2008, the very nature were shown the door. ......... Selected by msnbc.com of turnaround professionals suggests they 1. Mortgage defaults rise in the U.S. and home prices fall, triggering will be ready. Debt chaos in commercial paper markets and a credit crisis that reverberates The year came to an end with lackluster Certification around the globe. holiday sales, oil prices near all-time JUNE 2007 TREND WATCH Opportunity This 2007 TMA Annual Report highlights 2. Toy recalls cause potential backlash against “Made in China” products. highs, rising unemployment, and fear POLL FORETELLS CRASH Brazil 3. Crude oil prices march closer to $100 a barrel, keeping gasoline pump the accomplishments of turnaround pro- that a tottering economy was headed PROJECTED INCREASE IN prices high. fessionals who have devoted their ener- Weak U.S. Dollar toward recession. DEBT DEFAULTS 4. Apple Inc.’s profits and share price soar with launch of iPhone and gies to building an international updated iPod players. professional community dedicated to Other Indeed, six out of 10 respondents in the 4% 5. The Fed cuts borrowing rate twice in the second half of the year to corporate renewal and turnaround man- 2009 or later Expansion Last half of 2007 keep the economy from falling into a recession. Turnaround Management Association's 13% International agement. As it approaches its 20th 20% 6. Dow Jones Industrial Average tops 14,000 for first time, then pulls annual Trend Watch poll on the state of Chapters anniversary year in 2008, the TMA is Easter Europe...........back as credit crisis intensifies. the turnaround industry reported now more than 8,000 members strong 7. U.S. dollar falls to record lows against the euro. inquiries, engagements, and revenues Last half of 2008 and continues to advance its mission: 23% 8. Media consolidation with Rupert Murdoch buying Dow Jones, parent had increased at least 10 percent in the 1st half of 2008 China of the Wall Street Journal; Sam Zell acquiring Tribune Co.; Thomson Corp. “To serve the needs of participants from 40% past 12 months. Seventy percent report- Hong Kong taking over Reuters. all disciplines by building awareness of ed an uptick in inquiries from banks and 9. Ousters of Merrill Lynch CEO Stan O’Neal and Citigroup CEO the corporate renewal industry, promot- TMA respondents to a June 2007 Trend Licensing lenders, up from 57 percent in 2006, Watch poll nailed it. Sixty percent said Charles Prince. ing high standards of practice, fostering Emerging Markets10. Food recalls as e-coli and other health risks found in hamburger meat. evidence of the widening impact of the by mid-2008, there would be a signifi- the professional development of and cant increase in debt defaults. credit crunch. Educational enhancing the image of TMA members.” Growth Turnaround professionals demonstrated ......Investors their nimbleness in the face of economic Russia vagaries, employing the skills they use every day to manage crises on the job. India Following the 2005 passage of the 2 3 Brazil Weak U.S. Dollar International Chapters Chapters Easter Europe Across the globe, the business of turnaround and corporate restructuring “Astute and well- China gained credibility in 2007. positioned players [can] Hong Kong assist companies…that Licensing A groundbreaking Enterprise Bankruptcy Law of China applying to a broad lose their Emerging Markets swath of insolvent entities took effect. Distressed investors flocked to Europe Educational in search of new vistas as the greenback withered and the U.S. subprime footing as ...........Growth mortgage crisis grew. Emerging markets in Brazil and elsewhere hummed. the world flattens. The Debt Certification Even the sturdiest global markets began to see signs of trouble as the year separation Opportunity wore on and credit casualties on the U.S. front mounted. Local governments between Brazil in Australia raised concerns about potential losses from mortgage-backed foreign and domestic is Weak U.S. Dollar investments. European banks broke into a cold sweat as the value of corpo- rate loans and bonds began to melt. News photos of customers clamoring for becoming less relevant in their savings during the run