September 2005
When the Cup Runneth Over…
Turnaround Industry to Benefit From Frothy Capital Markets

When the Cup Runneth Over…

Turnaround Industry to Benefit From Today’s Frothy Capital Markets
By Michael E. Jacoby, Managing Director, Phoenix Management Services, Inc.

Much of 2004 and 2005 to date have been distinguished by an exceptionally “frothy” capital market, driven in part by the entrance of a range of non-traditional funding sources offering companies easy access to a variety of capital structures. Even struggling companies now have a plethora of sources to turn to in their quest to assuage their capital needs. But there’s a potential downside to all of this new capital surging into the market – and that should present ample opportunity for the turnaround industry.(Ref # IND063)

Beyond Traditional ABL Structures –
Options & Considerations for Middle-Market Turnaround Debt Financing

By Gregory Williams, Group Head, CapitalSource Inc.

(Corporate Finance Special Situations)

Turnarounds have provided profitable opportunities these last few years for private equity sponsors, debt providers and middle-market companies. Today, access to – and terms for – debt capital to finance middle-market restructurings are as favorable for borrowers as they have been in years. Private equity firms and middle-market companies also have more choices than ever before, including cash flow facilities that provide leverage beyond ABL structures.

(Ref # IND067)

Unraveling a Paradox – Five Fatal Mistakes Made in Improving Economic Times
By Amir Agam, Director, FTI Corporate Finance/Restructuring

An economic upswing is an ideal time for a company to strengthen its position and balance sheet, but unfortunately, it is often the time when a company can dig its own grave. Overall sales growth often conceals the mistakes being committed until it is too late. To avoid these pitfalls, management and their lenders must institutionalize controls to avoid them.

(Ref # GEN008, TM042)

Carl Marks Advisory Group & NES Rental:

Decisive, Strategic Action Charts Course for Future Success
By Duff Meyercord and Doug Booth, Partners, Carl Marks Advisory Group LLC

Turnaround professionals and lenders know all too well the challenges facing companies that fail to recognize, and aggressively act upon, early signs of trouble on the horizon. Lagging financials, dwindling market share, ever-tightening liquidity and executive turnover are just a few of the obstacles struggling organizations can face. And while the challenges may differ by company and industry, the need for sound, strategic planning and decisive action does not.

(Ref # TM043)

ABL in Acquisition Finance – Points to Consider
By Cynthia Collins Allner, Principal, Miles & Stockbridge PC

Asset-based lending structures continue to be attractive methods for financing acquisitions. In contrast to cash flow finance, asset-based finance is offered with fewer covenants, providing borrowers more flexibility in financial performance. However, there are special considerations in using ABL structures in the context of an acquisition.

(Ref # LGL046)

Red Flags for Lenders…

Monitoring the Borrowing Certificate
By Marcie B. Trump, Founder & CEO, Trump Lender Services, Inc.

It’s easy to play Monday morning quarterback when a deal takes a turn for the worse; somehow everything now seems so obvious. It’s not always possible to detect fraud or misreporting, but prevention is a lot easier and potential losses minimized if armed with strong monitoring tools,
sound reporting requirements and common sense while the situation is salvageable.
(Ref # FIELD007)

Continuous Innovation: Certified Turnaround Professional Designation Now Available to Lenders
By Thomas D. Hays, III, Principal of NachmanHaysBrownstein, Inc.

Today, with more than 7,000 members in 34 chapters around the world, the Turnaround Management Association is the leading organization dedicated to corporate renewal. As such, the TMA’s mission is to serve as a forum for corporate renewal professionals from all disciplines, and to promote the highest standards of practice. Recently, the TMA embarked upon a certification program to further these goals.

(Ref # TM044)

Secured Lenders Beware…

New Bankruptcy Act Affords New Powers to Landlords & Vendors
By Gerard J. Leimkuhler, CEO and Gary M. Murphey,

Managing Director & CFO, Wescott Strategic Management LLC

The following article addresses two significant changes resulting from the recent Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which could result in immediate negative consequences for secured lenders. These and other changes in the Act will result in debtors and creditors seeking cash collateral funds or carve-outs in the initial days of a bankruptcy filing. For secured lenders, it may be time to up your reserves.
(Ref # LGL047, BANK015)

Finding the “Best” Solution:

A Case Study in Venture Merchant Banking

By Joseph Ingrassia, Managing Member, Capstone Business Credit and Kelly Hickel, Managing Member, The Turnaround Group, LLC In the following case study, Joseph Ingrassia, managing member of Capstone Business Credit, and Kelly Hickel, partner of The Turnaround Group, discuss the recent turnaround strategy for Best Mainenance, Inc., a New Jersey-based a holding company with operating divisions in service station maintenance, environmental testing and tank replacement.
(Ref # TM045)

A Different Approach…

Receivership Provides a Viable Alternative to Bankruptcy
By Matthew A. Salerno, Attorney, McDonald Hopkins, Co., LPA
While bankruptcy is a familiar concept to secured lenders and other business restructuring professionals, receivership typically is not. As a result, it is often surprising to many that receivership is a viable alternative to bankruptcy. For secured lenders and restructuring advisors facing the dilemmas presented by distressed businesses, receivership is an attractive alternative to consider.
(Ref # LGL048)

Not Your Standard Fare…

Special Challenges in Food Inventory Appraisals and Liquidations
By David Ellis, President, Buxbaum Group

Secured lenders who think it’s just as easy to evaluate one company’s inventory as another’s probably haven’t had a taste of liquidating a food company. In order to assess it with an eye to liquidation, lenders need to be aware of several factors that are unique to the food processing and distribution business.
(Ref # APP022)

Columns

A PROFILE OF SUCCESS
The Entrepreneurial Spirit…

Turning a Possibility Into Reality

A Profile of John Delaney, Founder, CEO & Chairman, CapitalSource

Successful entrepreneurs have an innate ability to build a series of prosperous enterprises evolving out of an opportunity that everyone else missed. Smart, ambitious and tenacious, these individuals turn possibility into reality. This is who John Delaney is.
(Ref # EXEC024)

A CLOSER LOOK
Assets, Assets:

Wherefore Art Thou, Assets?
By David Feltman, National Sales Manager, Collateral Specialists Inc.

As a rule, by the time a credit manager or asset manager starts singing the above lament, it’s too late. The variety of programs offered today by inspection companies and their rapid response times have simplified the problems associated with asset management, thus allowing asset managers and credit managers to sleep soundly at night.
(Ref # FIELD008)

LEGAL EYES
New Bankruptcy Code Amendments:
Major Changes Shift Leverage In Favor of Special Interests (Part II)
By Peter J. Antoszyk, Partner, Brown Rudnick Berlack Israels LLP and Jay R. Indyke, Partner, Kronish Lieb Weiner & Hellman LLP

On April 20, 2005, President Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 into law, which amends the United States Bankruptcy Code. Part I appeared in the July-August issue of ABF Journal.
(Ref # BANK014)