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INTERNATIONAL NEWSNEWS A message from TMA’s VP of International Relations Third Quarter 2005 Vigorous Articles international •AroundtheHorn: PerspectiveonLatin Americanrestructurings activity . .. 3 prompts chapter •Restructuringchallenges restructuring inRussia . .20 by William Skelly •TMAJapanChapter grantedfullcharter t the TMA Board of Direc- current chapter setup to a licensing status . .24 agreement structure with its affili- tors meeting held June 3, 2005, International Task ates outside the United States and Events Calendar AForce II was given the go-ahead to Canada. •Australia . .26 proceed with a remodeling of TMA’s •Canada . .26 If approved, the change is expected •U .K . .26 international chapter structure. to give prospective international After extremely careful and consid- chapters greater flexibility as they ered discussion, the Board agreed go through the start-up process and with the recommendations of Task grow into vibrant and productive Force II that TMA needed to find TMA organizations in their respec- a way to accommodate the legal, tive regions. economic, political and sociologi- We expect that the Board of Direc- cal nuances of its chapters outside tors will be asked at their October North America. 2005 meeting to approve the new Task Force II will now investigate structure and that the dues for the possibility of changing its international affiliates/licensees will INTERNATIONAL be reduced from their current status. Certain We continue to receive inquiries about NEWS services provided by TMA headquarters that forming TMA chapters from all parts of the are not found to be as valuable or practical world. outside of the United States and Canada will The International Committee has asked likely be reduced or eliminated. Howard Brownstein, CTP, to spearhead an effort to establish a chapter in Hong Kong. Restructuring our chapter South Africa is also close to becoming a model will enhance TMA’s role chapter in formation. Taiwan is experienc- as the voice of the turnaround ing growth in its membership. Continental industry worldwide. Europe will likely see the formation of one or two more chapters in the next 12 months. The stated vision of the Turnaround Man- And it goes on and on. agement Association is to be the pre-eminent If you, as one of our international members, voice of the turnaround industry worldwide. would like to become more involved in Restructuring the TMA chapter model will TMA’s International Committee, please drop help us attain that goal. me a line at [email protected]. 1 * * * * * * * * * * * * TMA’s chapters in France and Japan were granted full chapter status during the June Bill Skelly is a Partner at the Canadian law firm of Heenan Blaikie LLP. He is a former Board of Directors meeting. We congratulate President of the Northwest Chapter and an the hard-working members who have suc- ardent supporter of TMA’s global expansion. ceeded in establishing these chapters. TMA International News is a publication of Turnaround Management Association, 100 S. Wacker Drive, Chicago, Illinois 60606. Published quarterly, it serves TMA’s non-U.S. members and focuses on topics of major interest to the international community of corporate renewal professionals. © 2005 Turnaround Management Association. Editorial Advisory Board William E. J. Skelly – VP TMA International Relations Ward Mooney – TMA Chairman Linda M. Delgadillo – TMA Executive Director Donna Steigerwald – Managing Editor TMA International News 3rd Quarter 2005•2 INTERNATIONAL Panel discussion at TMA 2004 Annual Convention NEWS Around the horn: Perspective on Latin American restructurings omprised of investment bankers, U.S. with failures. Panel members explored divergent and Mexican counsel and distressed views of creditor and debtor negotiating strategies debt investing specialists, this panel and leverage points. They also debated dueling Cmet in a session at TMA’s 2004 Annual Conven- perspectives of borrowers and creditors of implemen- tion to provide a first-hand perspective on how to tation options. bring about a successful financial restructuring in What follows are excerpts from that discussion. a difficult environment—one that is often littered Moderator: Neil Augustine Panel: Jason Cook, Richard J. Cooper, Fernando E. del Castillo Augustine: Collectively, I think we on this exactly why it got into trouble, and whether panel believe there’s a recipe for a success- or not the current situation is a permanent or ful financial restructuring, which includes temporary impact from a cash flow perspec- several ingredients. tive. One ingredient is knowing the process and You need to understand what the value what you need to have to be successful from fundamentals of the business are in order to a process perspective. You need a well-man- allocate it in a way to get buy-in from your aged process, a transparent restructuring creditor constituencies. You need to under- game plan in terms of how you’re going stand what the capital structure looks like and to deal with all the creditors. You need to each of the debt securities within it. make sure that your stakeholders are orga- You need to understand what the creditors’ nized and have the appropriate professional position would be in various negotiations advice. Some people might take a different and whether they have certain leverage over perspective on whether or not it’s good to other creditors, over the company. You also have them organized or not, whether or not need to understand what their weaknesses are. you should pay for their professionals or You need to understand who exactly is going not. Those will be some of the items we will to form the basis of these different creditor highlight. constituencies that you’ll be negotiating with. The other key component for a successful Later, Rich and Fernando will talk about the restructuring is the knowledge base. You legal environment, whether you’re going to need to understand the borrower extremely try to consummate this restructuring through well. You need to understand its capabili- ties to service debt. You need to understand TMA International News 3rd Quarter 2005•3 “Around the horn” panel discussion (continued from pg. 3) INTERNATIONAL the U.S. courts, through the Mexican courts in pulling together the business plan, and or some other foreign jurisdiction. investment bankers who would assist in NEWS negotiations with creditors in structuring First and foremost, particularly in Mexican the transaction. You need to understand restructurings, knowing the shareholder and who your key constituencies are, who you’re management objectives up front are really going to be dealing and negotiating with. the keys to success. In the U.S. system, it’s And they need to pull together their team of the creditors who are really calling the shots, advisors, legal and financial. particularly in an insolvency situation. That’s One must have a road map—how you’re going to get from point A to point B in this In Mexican restructurings, process. And you need to make sure you knowing the shareholder and have stakeholders who have bought into the management objectives up front process so you can have good faith negotia- are really the keys to success. tions. I’d like to open it up to the panel to discuss the following: How transparent should a borrower be with its creditors, and should not the case in Mexico. It will be interesting the company pay for creditors’ professionals? to debate that topic later in terms of who As we represent companies, the management has more leverage. Does the borrower, who’s team always asks, “Are we better off having typically the management team and the them organized or not organized, represent- shareholders, have more leverage over the ed or not represented?” Rich, maybe you can creditors or vice versa? kick that one off with your perspective. You also need a good understanding of what Cooper: I think there’s a trend in emerging the requirements will be for a successful markets, not just in Mexico, for certain stan- structure. Is it just a leverage issue, or is there dards of how to conduct the process. You something fundamentally wrong with the see it in Argentina these days where there business? have been a number of restructurings, and in In developing the game plan, the first thing Mexico as well, where companies generally that needs to be done is to establish the agree to pay for legal and financial advi- company’s advisory team—forming the basis sors for creditors, particularly once they’ve of this knowledge requirement, understand- become organized. I think the real question ing the business and the cash flows, and how isn’t whether you should or shouldn’t, if you’re going to recapitalize the company. The you’re the borrower; the question is when legal advisor team would include both local you should or shouldn’t. My own experi- and foreign counsel. With a much more ence has been the earlier the better, but the liquid marketplace for distressed securities, key issue will be whether the debtor itself is creditors of Mexican corporations could be organized. in the U.S. or Europe, so you need to make I remember working with a company that sure you have the appropriate counsel to was literally running out of cash. They were address those issues. talking to their operating company lenders From a financial advisory perspective, you to increase working capital and trying to need turnaround consultants, crisis managers get the cash to keep the business going. who would focus on assisting management We missed a debt payment on the holding TMA International News 3rd Quarter 2005• company debt, and the question became: to take steps to try to put some pressure on INTERNATIONAL what should we do; how should we talk to the debtor to engage, including beginning holding company creditors? litigation, which is a last resort for us, but NEWS was necessary in this case.

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