TMA International NEWS First Quarter 2008 A message from TMA’s VP of International Relations • First TMA European conference . 3 • TMA Australia report . 4 An “R” by any • News from TMA headquarters . 6 other name… by Gordon Johnson ould smell as While many of us enjoyed an otherwise sweet.” You say tranquil mid-March weekend, Bear …W”to-may-to,” I say Stearns, the investment bank that often “to-mah-to!” However you pronounce came to the rescue of others, was sold in it, most analysts have now resolutely a fire sale to JP Morgan Chase for a mere embraced the “R” word—Recession. The $2 USD per share or total 236 million main point of debate is how long and USD (est. GBP 116 million/Euro 151 mil- how deep. lion) and assumption of liabilities. It is not official yet, because a recession The U. S. Federal Reserve facilitated is marked by two consecutive quarters the sale by extending liquidity funding of economic decline. Still, given declines of $20 billion USD to JP Morgan to al- in economic performance and GDP, leviate concerns over the ability to meet decreasing sales, declining market caps Bear’s obligations. A year ago, Bear’s and dollar values, increasing unemploy- stock market value was $20 billion USD, ment, widespread mortgage problems, dwindling to $3.5 billion as of March 14, and financial losses approaching USD triggering a crisis of confidence that ul- 200 billion with more to come, it seems timately led to its demise and midnight almost self-evident that the United fire sale to avoid bankruptcy. States is in a recession. Acknowledging a U. S. recession, what Some pundits are now boldly forecasting does all this mean for the rest of the the “D” word—Depression. By nearly all world? One thing it means is that when accounts, we are in for a bigger market I go skiing in Canada, as I did several correction than most expected. This weeks ago at Whistler, I get less money seems to be underscored by recent back for my dollar, and I suspiciously events. eye the coins in my hand as if I’ve been (“An R by any other name…” -continued) TMA International NEWS shortchanged by my honorable neighbors to for low-cost exports and services. Some experts the north. It also means that prices in foreign are increasingly concerned about a deepening countries seem unusually inflated. Then again, global financial crisis, especially among those in perhaps they were inflated to assist our friendly the financial community. neighbors in covering their costs for the 2010 Is your business ready; how will you take advan- winter Olympics. tage of the reshaping of the global market place? These small grievances aside, since our last This and other questions will be the subjects of report, the value of the dollar has reached new discussion at TMA’s upcoming Spring Conference record lows against foreign currencies, while the in Orlando, Florida, (March 27-29), featuring price of oil has risen to new record highs at $110/ panels on (1) the looming global financial crisis, barrel. This inverse relationship is understand- distressed opportunities and sovereign wealth able, given the use of dollars to transact oil sales. funds, (2) global business investment risks and emerging market opportunities, and (3) cross- U. S. stock indices are also down and declining, border preparedness. and rising and declining; despite last week’s larg- est single-day rally in five years, the gains were As discussed in the article that follows, TMA will almost immediately erased. These undulations be addressing the state of the European markets in the market have pushed the market volatility in its inaugural regional conference to take place index to new peaks in recent weeks, an oft-recog- in Paris on April 10-11. We welcome your partici- nized harbinger of recession. And for the mon- pation in both of these events and look forward etary types among us, the “I” word—Inflation—is to visiting with you, should you have the oppor- becoming more fashionable, as each new shaving tunity to attend. of the interest rates further weakens the dollar. As always, we encourage our members to provide Some consider our weaker currency a good thing, newsworthy articles or briefings on leading spurring exports and stifling imports. But this is developments and events for this newsletter. If overly simplistic, as the world of finance, invest- you have news items or ideas for appropriate ment and trade is much more inter-related these articles, please contact Managing Editor Donna days and a weakening dollar affects the price of Steigerwald at [email protected]. oil, the financial position of countries holding We also welcome your thoughts and feedback on large sums of dollars, and a multitude of cur- any ideas for strengthening TMA’s international rency hedge devices in international contracts. network. Please direct those to me at gjohnson@ Whether a recession or just a rollercoaster of vol- emadvisors.net. • atility for the foreseeable future, the state of the U. S. market and declines in European markets Gordon Johnson is President of EM Advisors LLC, are bound to impact the rest of the world, includ- a firm concentrating on emerging markets. He for- merly headed the World Bank’s global insolvency ing emerging markets that depend on demand and creditor rights practice group with projects in more than 50 emerging market countries. TMA International News is an electronic publication of Turnaround Management Association, 150 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. © 2008 Turnaround Management Association Editorial Advisory Board Editorial Committee Gordon W. Johnson – Sandra Abitan – Montreal VP TMA International Relations Michael Fingland – Australia William Skelly – TMA Chairman Philippe Grabli – France Arthur Perkins – TMA President David Hole – United Kingdom Linda M. Delgadillo – TMA Executive Director Eiten Inamura – Japan Donna Steigerwald – Managing Editor Jan van der Walt – Southern Africa TMA International News 1st Quarter 2008•2 ©2008 Turnaround Management Association TMA International NEWS 2008 TMA European Conference Scheduled for April in Paris by Alan Tilley, Huron Consulting Group, Past President TMA-UK MA will hold its inaugural TMA Europe benefit from regional network- regional conference in Paris on Friday ing and cross-border issue TApril 11, 2008. educational opportunities. The conference will be preceded by a dinner on A meeting of TMA Europe the evening before that will feature a keynote Chapter Presidents sched- address by Jean Chrétien P. C., Q. C., former uled for Thursday, April 10, Prime Minister of Canada, and will close with will explore greater regional a champagne reception. cooperation in key areas, such as professional accreditation, The venue for the event will be the magnificent administration support and Westin Hotel in Rue Castiglione, known for its regional funding. Parisian charm and just a stone’s throw from the Louvre and Place de la Concorde. The full agenda, sponsors and speakers list is available “European Restructuring—Towards a Level on the TMA (UK) website, Playing Field” is the theme of the conference, www.tma-uk.org, along with registration and which will examine important issues aris- payment details. There is a link from TMA ing from recent experiences of jurisdictional International’s website. forum shopping, cross-border distressed investing and opportunities for professionals Payment is online and can be made by credit and stakeholders as the effects of the credit card or check. Rooms at reduced conference crisis unfolds in 2008. Breakout sessions rates will be available through the Westin, if will deal with Eastern Europe and corporate booked before March 24. A link to other hotels governance issues. in the area is also on the website. Jacques Gounon, CEO of Eurotunnel, will TMA thanks the sponsors who are support- speak on his experiences with this recent ing this conference and the members of the landmark European restructuring. With TMA chapters in UK, France, Germany, and Finland and chapters in formation in Holland, Spain, Czech Republic and Italy, plus significant conference steering committee who have given interest in other Eastern Europe countries, generously of their time to ensure a first-class TMA’s international and European growth program. has reached the point that members can now • ©2008 Turnaround Management Association TMA International News 1st Quarter 2008• TMA International NEWS TMA Australia reviews successful 2007, plans for active new year by Michael Fingland, Vantage Performance MA Australia held its 4th National The following key issues are the main reasons Conference in Sydney on November behind an increase in loan defaults and general T15-16, 2007. In addition to a variety of “financial stress” across a number of industries top-quality speakers, the conference featured in Australia. the Gala Dinner, an event that has become the chapter’s primary social event of the year. Credit crisis The housing and credit crisis in the United Turnout for the conference and dinner, which States has greatly impacted world credit mar- continues to build every year, was close to 140. kets, causing a dramatic reduction in liquid- Membership Update ity. Australia is now seeing higher pricing of risk across the board and a re-rating of risk TMA Australia’s membership received a by the major credit agencies. The net result significant boost in 2007, increasing by 52% to is that debt is becoming harder to source and 217 members. The chapter’s board of directors more expensive for existing and prospective recently approved a budget based on achieving borrowers. 300 members for the 2008 calendar year. Oil price 2008 Board of Directors Oil has increased by approximately 50% in Chairman terms of U.