Restructure This! Podcast Ep. 19

Turnaround and Performance Improvement Strategies with Kobus van der Zel

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Listen to the original podcast released December 28, 2022 here:

Sheppard Mullin's Restructure THIS! podcast explores the latest trends and controversies in Chapter 11 bankruptcy, commercial insolvency and distressed investing. In this week's episode, we're joined by Kobus van der Zel, the owner of Ravinia Capital Performance Improvement, a financial advisory and investment firm in Chicago. In his conversation with host Justin Bernbrock, Kobus explains what his engineering background, military service in South Africa and the Myers-Briggs personality test has to do with financial turnarounds.


About Kobus van der Zel

With more than 28 years of experience in business improvement, Kobus van der Zel is passionate about helping overleveraged companies reverse the root causes of past underperformance, return to market-share growth, and achieve optimum business value in future sale transactions. As the owner of Ravinia Capital Performance Improvement, he works with business owners to realize higher valuations and effectuate successful turnarounds when they need it most. Over the last several years, Kobus has successfully guided numerous middle-market companies, including Swisher Hygiene, West Coast Commercial Printer, and Cycle Force, through the turnaround process. He is author of the 2011 book, The Forces of Progress, an exploration of the factors that fuel or hamper progress in modern companies. 

About Justin Bernbrock

Justin Bernbrock is a partner in the Finance and Bankruptcy Practice Group in Sheppard Mullin's Chicago office, where he focuses on all aspects of corporate restructuring, bankruptcy and financial distress. He represents clients across a wide range of matters, including debtor and creditor representations. He has substantial experience in out-of-court and in-court restructurings, primarily in the Southern District of New York, Eastern District of Virginia, District of Delaware and Southern District of Texas.


Justin Bernbrock:

On this installment of Restructure This, we welcome Kobus Van Der Zel, the owner of Ravinia Capital Performance Improvement, financial advisory and investment firm in Chicago that helps business owners to realize higher valuations and effectuate successful turnarounds when they need it most. Over the last several years, Kobus has helped numerous middle market businesses, including Swisher Hygiene, West Coast Commercial Printer and Psycho Force. As part of today's conversation, Kobus and I will discuss some of the turnaround and performance improvement strategies that he has used throughout his career with great success. As always, stay tuned after the interview for a quick rundown of current restructuring news and notable stories.

And we're back, and as I mentioned at the outset, our guest today is Kobus Van Der Zel of Ravinia Capital Performance Improvement. Kobus, thanks so much for joining us today and really looking forward to hearing from you. And so let's dive right in, what got you interested in restructuring and turnarounds and workouts? Tell us how you came to be where you are today.

Kobus Van Der Zel:

No, thank you, Justin. I'm really excited to be here and to have worked with you and Bryan and the awards that you guys have won. So I'm excited to do this.

That's a good question. At the moment, I work with Ravinia Capital Performance Improvement, where my partner Tom Goldblatt has been selling companies. But sometimes some companies I've heard on them, and they cannot sell for the price the owner wants. But the bank is putting pressure on them to sell, and then I come in and I basically fix what needs to be fixed so that I can sell it at something that makes sense. So that is where I'm at the moment.

But I'm a mechanical engineer, I started in the mid to late eighties, and then I did my compulsory military training in South Africa. I applied to go to the Navy and I got it. And that was the year that Nelson Mandela was released. So while I was carrying sandbags and tarp poles on the beach on the west coast of South Africa, Mandela walked out of prison. That caused my two year training to go to one year, and then they abolished it the year after that.

But that experience really changed my life. It really showed me what I was capable of because they made us do things, Justin, they made us do things that I would swear were impossible. In the platoon, they would give us all of this equipment, and it's impossible for so many men to carry it all. Then there's one day we started around the athletic track and 400 meters, and we did all that. But it was supposed to be a 20 mile run or 20 kilometer run. I was convinced that they were just joking because after that 400 meters, we were already exhausted. So we continued for 20 kilometers carrying each other, dragging our bodies along. It just opens your eyes of what you are humanly capable of.

Then I try to apply that to business later on. So that got me to be a manager, but a manager with a kind of extreme bent, if you like. To always want to push the edge and see where can I take this team? What can we do more, using that experience as a baseline.

Justin Bernbrock:

Yeah, it's really interesting. I, as you know, have a similar background in the military and-

Kobus Van Der Zel:

Yeah, I heard your interview at the executive speaker forum. That was quite fascinating. Yeah, yeah, we share that experience. You have a much deeper experience than I have.

Justin Bernbrock:

Well, I think that probably just means it took me longer to get my stuff together. I went into the Navy out of high school when I was 17, and that, for me at least, was the fastest way to get out into the real world. I felt constrained by living at home under the rule of my parents. Of course, the irony of the situation is I went into a probably far more restrictive regime than I had contemplated, but it was one that suited my personality. I totally agree with you, that looking at some of the things that I experienced in the military, in hindsight, it's really interesting what you learn about what human beings are capable of. And collectively capable of, too, which is I think a really interesting aspect of this.

Kobus Van Der Zel:

Yeah. More importantly for me was, I realized I'm not the best judge of what I'm capable of. So that opened a whole mentorship trap door for me to see if I had a mentor just like Toni Nadal to Rafael Nadal, somebody who can really challenge you beyond that point where you think your limit is. Over time, in the right way, it can be destructive, of course. But that whole concept I wrote in my book, the Forces of Progress about, but also in the program that we'll talk about later,, which is an online mentorship program I use in my clients. That opened that whole door for me to become an expert at that.

Because my dad was a scientist, he was in forestry. I was born in this forestry environment. But he was a scientist, a little bit of a nerd. He was working for a government, I didn't want to go into that direction. I wanted to do aggressive business stuff and he couldn't mentor me. Then I realized my family is not the best vehicle for me to receive mentorship from.

Then I did my MBA, which was a lot of disconnected knowledge, but then I read this book, The Goal by Dr. Eliyahu Goldratt. And he's a physicist that wrote this book in the early eighties, and this book just tied it all together. Then that was the catalyst that really got me to make a huge change in business very fast. First as a manager, and then I went on my own and I did these baseline deals that we'll talk about. I've been doing that since 1999, so really interesting how you can catapult yourself with the right mentorship and the right ideas and mindset.

Justin Bernbrock:

Yeah, it's fascinating, truly. So you've been doing this now more than two decades. As you look back over that experience, what are the trends that you see, if any? And what do you think that those trends might or shadow about the future?

Kobus Van Der Zel:

Yeah, good question. When I came to the US, it was nine months before the financial crisis. But one of my first projects where Market Bank got refinanced into Wells Fargo Bank. I started to understand the special asset groups of these big banks. Also worked with a Bank of America's special asset group, and these special assets group has been dwindling down, and less and less of them had a real big impact on the bank.

They started to open these selling windows rather. So if they had a bad loan, they would rather just put pressure on the company to sell it. That is where Ravinia Capital and firms like that, investment banks can benefit because now the banks just put pressure on the company to get more capital in. But often capital is not the answer. But a lot of times it works because with the Federal Reserve’s programs since the financial crisis in '08, '09, there's just been so many waves of [inaudible 00:08:52], a lot of cheap credit. And that has been a good trend for banks to just sell the credit to somebody else. That's been working, and I'm sure that will continue to be the trend going forward. I don't see huge special assets group coming back. So that's one big trend that we see.

The other trend is just market cycles. I've been observing market cycles. Because sometimes I feel like I'm a bear in a salmon run and I get really hungry until I get my next salmon. Because I do typically one intervention at the time, and then you have to really almost hope that there's a distress cycle coming so that you can get your next salmon run. During that time, I was investigating what is causing these salmon runs? Why it tends to go into cycles? I stumbled upon Kondratiev, Nicola Kondratiev at this 60 year cycle theory. And just became aware of that this credit cycle seem to be two generations at the time. So it takes us as a society almost like two generations, it seemed like, to forget about the past problems.

So if you look at Bryan Uelk in your firm, he started working in 2015, so he hasn't seen a full credit cycle, a full contract, you call it a summer cycle and a winter cycle. So as the cycle goes to the 30th year, normally you have overheating. So he says it's a spring, a summer, an autumn and a winter. So in the summer cycle there's overheating, like in the seventies, huge inflation. But what we are facing now is a winter cycle since Bernanke and Great Financial Crisis. So credit freezes up, so you see spikes in inflation, but it's followed by deflation. Then you see these spikes up and down, it's really unpredictable and it's typically followed by wars.

So that's been a real interesting theory or just observation that I've been following. And looking at how we are trying to manage this now. It's certainly popular to have free credit available by the Federal Reserve, but also that's hiding discipline that the company should have and our competitive position in the world. So really interesting dynamics playing off around us from a bigger picture.

Justin Bernbrock:

You mentioned ... was it your father who was in forestry?

Kobus Van Der Zel:


Justin Bernbrock:

I'm curious whether any of that experience or any of the studying that you've done since then has focused on the natural world and the impacts of the natural world and changes in climate on sort of business and business cycles. What I'm really getting at here is a theory that increasingly we're going to see impacts that are not necessarily manmade. I'm sure we still will. There will always be instances like the '08 '09 Financial Crisis where I think it's pretty undisputable that that was caused by bankers and policies and greed, and other, we'll call them, manmade motivations. I'm wondering what your thoughts are on when the impacts of climate and things like that and resources, natural resources are going to start driving some of the, call it, winter cycles?

Kobus Van Der Zel:

Yeah, well that is really interesting question. If you just look at what's happening in the world, they've been talking about peak big for a long time, more than a decade. And it's so hard to have the political information out there to know who you should really listen to because it was supposed to be 10 years ago. Now we still have a lot of oil in the world, but it is becoming scarcer. And at what point will that really put an extra zero behind the price of oil? It's hard to estimate.

But right now Putin has really challenged some of the policies and the mindset of the waste by what he's done in Europe, whether you support him or Ukraine. I try to always keep a look at both sides of the coin and look at, okay, from Russia's point of view, it looks like this. From Ukraine's point of view and NATO in the west, it looks like that. But at the root of what's happening in the world. And he's really called the bluff and say, "You need our energy a little bit more than what you are pretending." And how much of that is going to be continuing if he continues to up that game of calling the bluff. I mean, you could really see a manmade, almost like elevation of this whole peak oil scarcity. And oil could really go to the moon one year and then down to nothing as the waste response will stimulus again. So that can be a really interesting cycle, but don't ask me to predict that, that'll be so unpredictable.

Justin Bernbrock:

Right. It's, I think, fitting that you keyed in on the unpredictability of something like that. This idea that more and more the natural world may cause significant disruption is the reason why, I guess, I think about it so much, that it is pretty unpredictable. I don't think two years ago folks in Texas thought that they would see a once in a generation freezing storm that would completely disrupt their power system and lead to a pretty significant fallout for ERCOT, as well as municipalities. I mean, they're still working on, I think, cleaning up the mess of that. That's tens of billions of dollars were, I think, wrapped up in that situation.

Kobus Van Der Zel:

Yeah, yeah, yeah. That is true. There seems to be a lot of nature cycles that are starting to ... pandemics, nature cycles, food shortages. All of those type of risks seem to be popping up where for decades it hasn't been on the radar. So really interesting.

Justin Bernbrock:

Yeah. Well, so just going back to some of your own experience and some of the trends that you've seen, particularly in the context of credit cycles and special asset groups and things like that. Tell us how those trends materialize for small family owned enterprises all the way up to sponsor back companies.

Kobus Van Der Zel:

Yeah, I've been working with quite a few family situations, family business that will be in trouble where the bank says no more. And either get new capital or just put a forbearance on the loan. In one case, the dad had four sons in the business, he had seven locations across the US and the dad ended up selling the business away from his sons. I was talking to the dad with a capital source and we were going to create a board of directors and run the company. But this all four sons, they were in their forties, but they all agreed that they are not ready to take over. For me, it was, how can it be? They were all in their forties. How come all four sons were relatively weak that they are not stepping up and saying, "Give it to me, dad. I can run this."

So this dad had this phrase that he used to say quite often, he would tell his sons, "There's no monopoly on brains." Basically telling them, you can figure things out for yourself. Which is what he has done. But he founded this business in the seventies when it was the last time we had a real recession and a real test of businesses. And since then, he's been riding the credit cycle up in relatively good business climate. But he's been telling this to his sons, and his sons never got battle tested. They never went to college because he was saying this, no monopoly on brains, you can just figure things out. They never went to college and they were just depending on their dad to be there all the time. So they became weak over time.

So I always look at ... like I'm from Africa, born in South Africa. So when I look at documentaries on PBS, you often see the lions hunt and how difficult it is to hunt. A pride of lions will specialize in hunting buffalo or they will specialize in hunting elephants sometimes. And they've figured out a way to do it, and sometimes this male will jump on the back of a buffalo to bring it down. Incredible the extent to which they are capable of going. But then you think of yourself, if you give that same pride of lions a sheep every day, will they go and hunt? I don't think so. They will just wait for their next sheep.

And that is the mindset I also take into a company. How can I get the team to really hunt all the time? Versus being dependent on a fixed salary, being dependent on a certain comfort level that's always been there. So that's made me think of different ways. It's almost like a company needs a mechanism to keep most of the people out of their comfort zone. That is the main thing you have to, as a manager or owner, constantly work towards addressing. If you leave it to themselves with their fixed salaries, they will always be less than optimal performance. So your job is to almost instigate that performance.

Somebody once said, any good company has a dreamer, a businessman, and a son of a (censored). And this statement was first phrased in the early 1900s, I researched it. But that's very true. So every time I came to a company like this dad and his four sons, that's truly underperforming. It's almost like you say somebody pinch me, how can so many weak people have collected in this company? That son of a (censored) is missing. Or one of the other pieces is out of balance. So that's a mindset that I always look for. Then I've developed tools that we'll talk about a bit later to counter that, to all of a sudden get people to start performing. Which then makes a difference, it's good for me then to leave a company behind saying, "Now that company's going to be growing."

Justin Bernbrock:

I think what I hear you saying here is that what I need to do perhaps during our next bankruptcy group practice retreat is we will row offshore, throw all the associates over the side and let them swim in. And maybe just for fun, we'll bring a couple of Thompson sub machine guns. And nothing motivates like hearing bullets zip by, I guess. I'm kidding, of course.

Kobus Van Der Zel:

Well, when you're at the top of a cycle, I call this at the top of the cycle because some of the stress is starting to come through like what's happening in Russia and on Ukraine and during COVID. COVID was a once off event, but that was followed by a lot of stimulus. So you have this problem, stimulus, problem, stimulus type of mode that we are in now. So during this environment, I call it the top of the credit cycle because there's so much money available, for the most part. Now it may be changing into next year, it's very unpopular to do what you just described, throw all of the associates. Because they have other options, they can go to other companies.

So you have to do it in a way that really attracts the right kind of line if you like, or the right kind of person to say, if your company or your law firm is going to be the top of the pile, what type of people do you want to attract? I want to attract hungry people that want to really work on the best Chapter 11 cases in the country. There needs to be a system of natural selection that spits out the ones at the bottom, just like Jack Welch did at GE, but in a popular way.

To do that, I use this mentorship approach. Each person should have a mentor where before you throw them over the side of the boat and they get some bullets, you give them a swimming coach and you say, "This is the way to properly swim and we're going to practice in the shallow pool. And then we're going to go on the boat and then take it to the next level." And the coach is going to be there with his megaphone and give you instructions from the side. That's how it happened in the Navy and not that comfortable, but there is a comfort level that you can build into this. That's my point. And that's what I've been trying to challenge myself to do.

So how can you do it in a way that ... because if you shine a light on the top performer, Jack Welch did this very well, as well. Jack Welch said in his book, your job as a manager is to differentiate. You have to show, this is the number one guy in this group, the number two and the number three. Maybe privately, not too publicly, let the people at the bottom know, you're at the bottom of the list, look at number one. And then mentor them to become more like number one.

And sometimes they will respond, sometimes it's just not in their wiring, and then they need to go somewhere else. That is a clean approach of how to do it in a popular way. Because the top guys will love it, they will say, "You are my leader because you are recognizing me as being at the top of the list and I'm going to stay with you because you're going to make me better." And the weak guys leave by themselves. But the top guys are not as vocal as the bottom guys. The bottom guys will be complaining a lot and saying, "This system is unfair." All of the noise come from the bottom, and that's why such a system is sometimes unpopular. But it's very necessary. It's the wolf that you need in Yellowstone to keep things disciplined.

Justin Bernbrock:

Yeah, no, it's interesting. So tell us a bit more about when you show up in a distressed situation, how you sort of work to correct some of the problems that you see in your role as turnaround specialist or turnaround expert.

Kobus Van Der Zel:

Yes. That is what I try to write in my book, The Forces of Progress about. But I try to make it quite simple. There's a big human aspect to it. So first of all, before I arrive on site, I typically do a two-day opportunity assessment, where I'm on site for two days and then I do my report after that. So before I arrive on site, every key manager gets an email in their inbox, it takes them to a website where they answer 24 questions and I get their natural work style or their wiring. It's based on a desk profile, you get Myers Briggs, you get different styles.

But that then starts a conversation with me and every key person in the company saying, what are you naturally wired to do? And what does your job require? And I showed them the gap on each one of the four points of the wiring. So that's a great starting point. So if there's a 40% fit for a CEO, that's a red flag, that needs to change. It's not something that you can live with. If it's a yellow, 50 to 60%, that's something you can work with. But 70% and up is green. So that's one thing.

Then you don't just fire the reds, you work with that over time in about three months, that person will leave themselves or you will have moved them to a place where they agree they belong. Because often they don't argue with you about it. It's kind of, yeah, I was never supposed to have this position, but this previous company just pushed me there and I've been there ever since. You come and you shine the light on that, you make those fixes.

And then it is after that, I look at the flow in the business. Now being an engineer, I think naturally I was attracted to the concept of flow and bottlenecks in the flow, which the book, The Goal, that I mentioned before is very powerful in highlighting blockages in this flow. So if it's a company importing from China, I will immediately say, this is what we are stopping to order this. The next container that comes underwater from Asia must be approved by me and the controller. Then we start draining the supply chain from inventory, which turns into automatic cash when a company needs it most. So those type of mechanisms, it turns a company from push to pull, as the Japanese had the Kanban system and adjust in time. It's almost as if you have to pull the trigger on committing cash at very specific points.

Now this gets very technical, but it's so powerful in a company that's in distress because they're sitting on a lot of capital, that's just hidden under these triggers that are not being exercised at the right levels. So the large transaction of the year award that I won in 2016 was for a NASDAQ listed company. They had five plants around the US and I came in, I did my assessment by item, by SKU and I could tell the board of Swisher, after a week, you have 16 million in inventory, I can get it to 8 million within two quarters. That allowed them to become cash positive for a first time in their entire history. This was by the way, Wayne Huizenga and Steve Berrard, who did all of the roll ups since the seventies. They did Waste Management and Blockbuster Video and AutoNation. This was going to be the fourth act rolling up the cleaning chemical industry. It was just a huge failure and this company was one of the most shorted stocks on Wall Street.

So when we sold that company, the stock went from ... it quadrupled in value. So it was just a try in extra time or in the last few seconds of the game, that type of thing. But it's very powerful what you can do with the right lean metrics in a distress situation. So I do that then. And then from a market point of view, often if you improve the operation, the market will become the constraint.

So I often go to a company, I look at their website traffic. You can go online and look at the website traffic on anybody's website, your legal website, anyone. And you just look at ... you see there's no traffic on your site, you are in the basement, you are hiding yourself from the market. Then you start the conversation of, what is your marketing avatar or persona that you really want to go after? Where are the customers that you don't have now? Where do they hang out? You get pretty creative nowadays with digital marketing. You can go on LinkedIn and target LinkedIn groups, or you can target people who hang on certain YouTube interests and really target those people and have a whole marketing program with multiple funnels, bring the constraint back into your operation, so that you never operation ... or market constraint but operation constraint. So that's a quick answer of how I look at the supply chain from the front, first starting with people, but then looking at the flow through the company.

Justin Bernbrock:

I'm curious as to your thoughts on ... and I go back and forth on this. But sort of what you were just mentioning in the company's marketing strategy. Do you think that folks like what you do and what we do, as Sheppard Mullin, advisory services based industries could be doing more? Like here's my struggle. I often think that LinkedIn, for example, the place where people go to tout their professional awards is not a place where meaningful business development occurs. But I'm willing to be persuaded otherwise. Do you think that in a sense, I'm asking for your advice and for a lot of the folks that listen to the podcast are like us, they sort of do what we do. Could we all collectively be doing a better job of using social media, multimedia to be generating business?

Kobus Van Der Zel:

Yes. So like many things in my toolkit, my eye is opened to what's possible. When I worked with this digital marketing agency in this one contract and they had such accurate metrics for measuring your return on ad spent, they call it [inaudible 00:29:06]. And just customer acquisition costs on different segments, it was so fine-tuned, it was unbelievable. It's just evolved into such a fine art to market yourself in this digital way in the internet.

The better you become at it, of course, if you do it too general, it doesn't work as well. But if you really go after a very specific persona or avatar, as they call it, you really connect to those people in a way that they will respond to you because it's very personal to their interest and you connect with those and a certain percentage of those convert to new clients every time. That is just a powerful source of growth. Where some of the traditional networking will always be there, of course, that's not going away. But you supplement that by just becoming an expert on digital marketing, as well. It's the way to go, you cannot ignore that with how it's happening in the world.

Justin Bernbrock:

It's really interesting. So tell us what you think are the challenges or strategies with respect to ultimately exiting a business. How have you seen some of these strategies in tactics that you've developed and learned play out in that context?

Kobus Van Der Zel:

Yeah, that's a good question and that's something we face every day now is an owner is forced by the bank or some other pressures. Sometimes they just want to exit because of where their on their career, but they cannot get the exit price. So something is wrong. Maybe the expectations need to be adjusted, but often there's something wrong. So first of all, it's identifying the issues. Is China killing them? What are the dynamics in the industry that's really causing this to happen? It's often that there's something on the team that you can fix, what I described before, some move.

But then there's the other dynamic of an owner operator is seen by private equity or a lot of the buyers as a lower multiple acquisition because they will have to put professional management in place. So an owner operator business goes for sometimes 2.5 to five. Where a professionally managed business can go from five to eight multiple of EBITDA range. Just facilitating the company to get professional management in place away from the family that may be running it or owner operator style can double the evaluation. Then next you look at your EBITDA, what growth are they in the EBITDA from these triggers I mentioned before.

Often you can bump the EBITDA quite nicely and then you look at your market constraints. And some of these market constraints are mentioned, you may be able to demonstrate for buyers, this is what we have already done, we have this success rate in online marketing. This is our conversion rates through the various funnel matrixes that we maintain. And here are the opportunities for you to come. And that is a great way to sell the business from a position of strength to demonstrate that you've done a bit of it, your early results, and then here's the opportunity for the rest.

Even in a Chapter 11 case where you work all the time, Justin, you can look at the restaurant group that's in bankruptcy and say, this is what they've done before. They've done no marketing, there was no traffic on their website. Now we've done this, this, and this. Now the traffic is so many eyeballs per month. All of a sudden, this is the conversion rates we are getting from our online marketing. This is the return on ad spend and here's your future opportunities. It's all teed up for a buyer and that buyer knows they can step in and execute. So that is quite powerful.

Then it's also a lot of time the sales function is totally misunderstood by the company. They will have existing external sales force and they just complain these sales people are not getting their quota every week, and it's just an underperforming group. Where if you put this online marketing on, that leads to a lot of new leads. It makes your sales force so busy that you are forced by just the volume that you are putting on them to get more salespeople or to utilize them better. That is the proper way to run marketing and sales. In most companies from service business like yours and ours to importers and manufacturing companies. So it works for all types of businesses.

Justin Bernbrock:

Yeah, it's really interesting to hear this idea that founder run versus professionally managed sort of difference in multiple, sort of an interesting thing that I just had never thought of, or had never focused on. Also, I understand also that you're a voracious reader. What book recommendations can you make for us and the folks that listen?

Kobus Van Der Zel:

Yes, thank you. It started from my mindset and quote I read from Sir Isaac Newton said this, if I have seen further, it was by standing on the shoulders of giants. So I try to stand on the shoulders of Jack Welch, Elon Musk, who wrote books and really learning from that and applying it. But also books like The Goal. But sometimes you get really an odd book like Fight Club. We've all seen the movie, but when you read the book, Fight Club, hidden gem of challenging a person, and if you look at it in the right way, a company, to not only continuous improve, but to consistently disrupt yourself.

So in that book for instance, it has Brad Pitt and Ed Norton, real edgy characters. And they call Ed Norton the narrator because the book is ... or the movies also, the narrator talks about his experience and he has this insomnia and he can't sleep, and he's like sleepwalking through his life and that's the point they're making. Most of us, we sleepwalking through our lives because we are not really aware of our full potential. And then Tyler Durden eventually takes the narrator's hand and he puts a chemical burn on it and the narrator wants to escape into this cave, which one of his psychiatrists taught him this escape trick to escape from pain. And Tyler Durden pulls his hand back and says, "This is the best moment of your life and you're trying to escape from it." He's making the point that we shouldn't see pain as an enemy. We should see pain as a friend.

It's a counterintuitive concept, but it's very true. I've been charging for results since the nineties for my project. So I've made pain my friend, if you like. There's many different ways where you can just have a mindset change and say, "Every time I feel pain, it's an opportunity to get better." Those type of concepts go through the book. Raymond, the store owner in that movie, Tyler Durden puts the gun to his head and he's threatening to shoot him. And then he let him go after the store owner told him what he really wanted to do in his life, not run a downbeat store, but he wanted to become a vet. Tyler says, "I've got your wallet here, I'm coming back to you in a few weeks, and if I don't see you starting towards a vet, I'll shoot you." Something like that.

So it's just a great concept to get people awakened to their full potential. So often people will see that book in my library, I come into a company and I put a physical library of books on a shelf. I call it, it's also online. So you can go online and you mark that you've read the book, and then there's a questionnaire, a test on the book. So people who saw the movie of Fight Club will often write a test and get zero out of 0%. They score nothing. Because the concepts are so well hidden, so then I take them ... there's a YouTube video on it that explains the story behind the story, and then they start getting it.

So a lot of these concepts are like a mentorship opportunity. You can take a book concept, but there needs to be a mentor to help them apply it in a business or apply it and practice it, go and put it in place. And as mentor, I'm going to judge you on the results. Then from there, they get credits. Every week there's an email coming out with the names of the people from top to bottom of how many credits did they accumulate the previous week, and that becomes a competitor force. People want to run themselves up that email every Monday. It's just a fun way to ... I call it a people accelerator. It engages people.

In this one company I was interim CEO of this year, people read 30 books in the first few months, and that's unheard of in a turnaround situation where people will read that many books. The program forces you to also apply the book, that's the main thing. You cannot just get the books and get the points to get to your belt levels, which is tied in the background. You also have to apply the book before you can move on. That is the big breakthrough. So I love doing that type of system because that is, as I described, making me really feel good that the company is now ... they got the knowledge, it's internalized, and it's a system in place that's going to make that people stronger over time. Where in the past, all the people in that company who were made weaker over time.

Justin Bernbrock:

That's fascinating. I mean, it's really a fascinating approach to a restructuring situation, for sure.

Kobus Van Der Zel:

Yeah, and it happens fast. It happens in a few weeks. You get this different vibe in the company where people are now competing for knowledge. And this person has read that book and now I must catch up. It's just bringing the health back to the company in a good way.

Justin Bernbrock:

Yeah, yeah. I like it. Well, this has been fascinating, Kobus, really appreciate your time and willingness to share your wisdom with us. One of the questions we ask everyone on the podcast is, if you weren't doing what you're doing now and involved in the turnaround world and assuming no limitations, what would you be doing?

Kobus Van Der Zel:

Wow, that's very interesting. If I was better at sports, I would probably do something extreme like that. I mean, I met this chap in Vancouver on one of my projects. He's 75 years old, he woke up six o'clock, he will be at the foot of a mountain, Grouse Mountain in Vancouver, and he goes through a hole in the fence with his buddies, 6:00 AM every morning, Monday, Wednesday, and Friday. They climb the mountain and take the first cable car down, and then he rocks up at work. And then over the weekend, he does crazy events like heli-skiing. He goes on these seven day eco-challenge events where they just do crazy things.

So I would probably have done something aggressive like that if I was good enough. I'm not a really good sportsman, but that type of ... he has lived a really interesting life. A life worth living, as I call it, by having that extreme nature in the background. But he's the top sales guy. He outperforms the other salespeople in that company by an order of magnitude. So just talking to him, there's spirit in that person that you cannot copy or create. That is an appeal to me. So I probably would've done something along those lines. But turnaround, being a turnaround manager is the business equivalent of that. So I'm pretty choked with the success we've had in the past and all the opportunities laying forward. I think in this economy there's going to be a lot of serious questions asked of businesses in between the stimulus, but that is what we are having and we have to work with that. But I think we're going to be in an environment where there's a lot of opportunities.

Justin Bernbrock:

Indeed. Well, Kobus, thanks so much. It's really cool and it's been great to learn more about you, and I really appreciate it.

Kobus Van Der Zel:

No, thank you. Thank you for the opportunity and best of luck. Looking forward to see more awards coming from your firm. Well done for how you running your company.

Justin Bernbrock:

Well, thank you. Thank you very much.

Bryan Uelk:

Hello again everyone. This is Bryan Uelk of Sheppard Mullin for Restructure This, with a holiday edition of the Restructuring News. All things considered, it's been a busy month for at least some of the bankruptcy bar and other restructuring professionals. As of December 27th, 33 Chapter 11 cases with at least approximately 10 million liabilities have been filed thus far in December, according to data pulled from Reorg. For reference, only 20 were filed in December of last year. The uptick brings the number of December filings in line with the last several years in which roughly 30 large Chapter 11 filings occurred in December. And don't think that most of these filings should be chalked up to the crypto crash. Remember, BlockFi and FTX filed in November. So aside from a couple cases, these December filings are mostly non crypto in nature.

Speaking of the stress outside of crypto, it appears that the Revlon debtors are making progress in Chapter 11. On December 19th, Revlon entered into an RSA with certain of its lenders and the UCC, which contemplates, among other things, equitizing pre-petition lenders, a fully backstopped rights offering, resolution of certain ongoing litigation between the debtors and certain term loan holders, a settlement fund to pay unsecured creditors and significant exit financing. The debtors subsequently filed a plan disclosure statement based on a transaction set forth in the RSA just a few days before Christmas. The RSA requires Revlon to have their plan confirmed no later than April 3rd, which must then go effective on April 17th.

It's nice to see Revlon making headway in what was filed in June as a massive free fall Chapter 11 case. If you had asked me back then whether Revlon would be upstaged by an even splashier Chapter 11 filing in November, i.e., FTX, I would've said you're crazy. But such is the world we're in.

On the subject of FTX, Sam Bankman-Fried has been extradited to the US. And after having been charged with a host of crimes, posted bail $250 million a few days before Christmas. He was reportedly spotted at JFK in an American Airlines affiliated business class lounge, hanging out with his lawyers, his family, and the FBI. As you might expect, numerous tweets and news stories ensued regarding the sighting. As folks were quick to point out that Bankman-Fried was flying business class after posting bail for a quarter of a million bucks while FTX customers may well get nothing in Chapter 11.

But don't think there's no justice in the world. Alex Jones of InfoWars fame finally filed personal bankruptcy on December 2nd. He faces potentially billions of dollars of liability related to the false claims he made regarding the Sandy Hook shooting. It warms my heart to see that actions really do have consequences.

Finally, because I mentioned this is a holiday edition of the Restructuring News, and because Die Hard is a Christmas movie, indeed one of the best Christmas movies. I would be remiss if I didn't mention that the building known in the film is Nakatomi Plaza, in real life is known as Fox Plaza in Los Angeles, is facing a large upcoming debt maturity in an uncertain lending environment. We'll see what happens.

Well, that's it for this week's Restructuring News. This has been Bryan Uelk Shepherd Mullin for Restructure This.

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Kobus van der Zel

Justin Bernbrock


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