Restructure This! Podcast Ep. 25
The Role of Professional Organizations in the Restructuring Industry with Scott Stuart of Turnaround Management Association
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Sheppard Mullin's Restructure THIS! podcast explores the latest trends and controversies in Chapter 11 bankruptcy, commercial insolvency and distressed investing. In this episode, Scott Stuart, CEO of Turnaround Management Association (commonly referred to as "TMA”), joins us to discuss the role of professional organizations in the restructuring space, including what distinguishes TMA from similar organizations, the importance of its diverse membership, and how restructuring has evolved over the last 30+ years.
Guest:
About Scott Stuart
Scott Stuart is CEO of TMA, a global nonprofit organization and professional community focused on turnaround management, corporate restructuring, and bankruptcy. Established in 1988, the organization boasts approximately 10,000 members, including turnaround practitioners, attorneys, accountants, advisors, liquidators, bankers, academics, government employees, and members of the judiciary, in 55 chapters spread across 20 countries and 4 continents.
Scott has held volunteer leadership roles at TMA for nearly 20 years. Prior to becoming TMA's CEO in 2018, he gained 30 years of experience in a variety of diverse roles in the corporate restructuring space. As an attorney, Scott has held positions at private law firms, in-house corporate legal departments, and the Department of Justice's United States Trustee Program. Scott has also served as a corporate executive, including Executive Director at Donlin, Recano & Company, Inc. In addition, Scott co-founded Esquify, Inc., a legal tech startup in the document review space.
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.
Prior to private practice, Justin served with distinction as an Aviation Warfare Systems Operator in Patrol Squadron FIVE and as a Weapons Tactics Instructor in Patrol and Reconnaissance Wing ELEVEN. During his nearly 10 years of active duty in the United States Navy, he was awarded the Navy Commendation Medal twice, including once for meritorious service during combat operations in Iraq. Justin also received the Global War on Terrorism Medal for his service in Kandahar, Afghanistan.
Transcript:
Justin Bernbrock:
On this installment of Restructure This!, we welcome Scott Stuart, CEO of Turnaround Management Association, commonly referred to as the TMA. Established in 1988, TMA is a global nonprofit organization and professional community focused on turnaround management, corporate restructuring, and bankruptcy. TMA has approximately 10,000 members, including turnaround practitioners, attorneys, accountants, advisors, liquidators, bankers, academics, government employees, and members of the judiciary in 55 chapters spread across 20 countries and four continents.
Scott has held volunteer leadership roles at TMA for nearly 20 years. Prior to becoming TMA CEO in 2018, Scott gained 30 years of experience in a variety of diverse roles in the corporate restructuring space. As an attorney, Scott has held positions at private law firms, in-house corporate legal departments, and the Department of Justice's United States Trustee program. Scott has also served as a corporate executive, including as Executive Director at Donlin, Recano & Company. In addition, Scott co-founded Esquify, Inc., a legal tech startup in the document review space.
As always, stay tuned after the interview for a quick rundown of current restructuring news and notable stories. All right, welcome back to another episode of Restructure This! Today we're joined by Scott Stuart, CEO of Turnaround Management Association. Scott, great to see you. Thank you very much for coming in. You're one of, gosh, I think only five or six in-person, guests that we've had throughout the podcast, so it's great to see you. I'm glad you could come in today and really excited to hear about everything you're doing at TMA. Before diving in, however, what brought you to where you are? What's your background in the industry and why do you do what you do?
Scott Stuart:
Great to be here and thank you so much for the invite. This is awesome. And I love the studio and I love being in person, so really terrific. How I got into this. Interesting question. By accident, the only two courses I didn't take in law school were bankruptcy and tax. Fearful of both. And here I am, over 30 years later, having a pretty storied career as a restructuring professional. I actually started my career with Department of Justice in the United States Trustee's Office. Went on to run a restructuring group in a law firm based in New York, and from there did some distressed investing mediation, taught some mediation through a program at St. John's Law School, did some claims agent work, did a legal tech startup, had been a volunteer in TMA for many years, and here I am.
Justin Bernbrock:
It's always interesting to hear people's backgrounds. You've been CEO since 2018, is that right?
Scott Stuart:
Correct. July 31st, 2018 was day one.
Justin Bernbrock:
What is the TMA? I obviously know, I'm a member. I think I'm sure many of our listeners are also members, but for those who may not be, what is it? Why is it important?
Scott Stuart:
The Turnaround Management Association is, dare I say, the premier organization in the corporate restructuring space. We're 58 chapters, 10,000 members worldwide. And what makes us stand out in the restructuring community is that unlike other associations, we have the most diverse group of professionals and resources worldwide. What I like to say is there's a lot of actionable optionality in our organization because we're constantly being introspective and we're looking at ways to support and improve member value every day. And wherever you look and whatever you do in the world of restructuring, there is a resource, a person, an opportunity through the Turnaround Management Association.
In the five years since I've been in this role, we have really changed the image of the organization. When I started, dare I say, we were the other organization or the networking organization. Over the course of the last five years, we've become the defining organization. When I started with TMA, I used to say, "You can be part of any other association, but to complete your professional conversation, you need to be part of TMA." In the course of five years, I can safely say it's now essential that you are part of TMA and it's a deficiency or the fraternal unprofessional support that you get if you're not part of TMA. I'm very proud of what the organization is, where we've come, where we're going, and how visionary and forward-thinking that we are.
Justin Bernbrock:
And the organization is regional, localized chapters that together make up the broader organization. Is that... In thinking relative to some of the other similar organizations, is there a distinct benefit in the all-politics-is-local thinking about specific areas? And I'll plug Chicago as being one of the chapters with which I and we are most active in. How does that distinguish TMA from some of the other organizations?
Scott Stuart:
Let me answer it this way with a story. The first event that I went to after I became CEO of TMA, I was invited to an event in Milwaukee, which of course is part of the Chicago chapter. It was a rooftop event, summertime. First person I met said to me, "It's nice that this is an international organization, but my focus is very low. What is the benefit of the organization to me?" And at the time, I actually struggled with that because I hadn't yet fully formed on day three where the organization could create that thread and understanding of opportunity.
Here's the answer to the question today. The brand is so powerful, and the brand is so defining, and the brand speaks so much to the diversity of professionals that are part of the restructuring industry, that the building of the brand as a worldwide powerhouse brand, is as impactful for those who want the reach of the internationalism of the organization right down to the local practitioner. Now that when you say TMA, you can be a shingles shop in Milwaukee, you could be a practitioner that is regionally focused in the Midwest, you can be somebody who has a national practice or somebody who has cross border overreach, but the power of the brand speaks to everybody. And the more we build
That brand and how important it is to the restructuring industry, it is as impactful to the world as it is to the one guy on the ground who is getting value out of it locally. It's changed in what it was, and the internationalism of the organization doesn't necessarily have to apply to everybody, but the power of the brand and the way that we built it locally, regionally, nationally and internationally, benefits everybody who wants to take advantage of the resources and the connectivity that it offers.
Justin Bernbrock:
That's interesting. Sometimes... Being a human being, it's convenient to categorize things because once I can categorize something, it's easy to just put it in its place. And now I just know how to think about it. Sometimes I will categorize the various professional organizations as catering to a specific type of professional in the industry. I have trouble doing that categorization with TMA because I think it cuts across several different disciplines within the context of the restructuring space. And it seems to me or occurs to me that that is likely purposeful. And I like to hear you talk a bit more about how it really is an agnostic organization, whether you're a lawyer or a banker or a consultant or an investor. It's, from my perspective at least, an organization that isn't easily siloed into catering to a specific type of professional.
Scott Stuart:
I think your perception is spot on. One of the things that is our distinguisher is exactly that. We have the most diverse group of professionals that any organization in this space has. And yes, that's very purposeful, where some organizations may cater to attorneys and some may cater to consultants. We have anybody who is anybody in the restructuring industry so that when you walk into a room at an event and you want to meet a financial advisor, they're there. You want to meet a lawyer, they're there. You want to meet a private equity person, a valuation person, an auctioneer. Yes, it's very purposeful. And that level of connectivity and that level of what makes the organization stand out because of the support and resources that it provides and the fact that anybody can create an opportunity to connect with anybody they may want to know, need to know or garner information from or connect to is available through TMA, and no other organization can boast that.
I think that that was always there. I just don't think until I became CEO of the organization that we really took the opportunity to exploit that in a positive way and to really show people that they had... I liken it to the best alumni association in the world. You go to a university and I can name several, and you have this alumni association that you reach into because they're part of a community that you trust and respect, and that's TMA. It's a community built on relationships. I'll tell you another story. I was down at an event early in my tenure in Florida and I met a small group of NextGeners, and the first question they asked me was, "I've been part of team A for a bunch of months now and I haven't gotten any business. What's that about?"
I said, "What that's about is it spawned a campaign. Build your personal brand and trusted professional relationships through this organization, and it will give back to you for a professional lifetime." It was that conversation that spawned that and the understanding that you're part of something bigger, that the one connection you make today and the trusted relationships you build will pay you back in spades if you put in the equity and build the relationships.
And another story I'll tell you that really exemplifies that, a couple of years ago at our Distressed Investing Conference in Las Vegas, I brought up 11 professionals to the state. Eleven. From one case. Each of whom was hired because of a TMA relationship. But not for the relationship that was built over time across multiple chapters in this really big hospital case based in Philadelphia. Every one of the professionals that got hired was hired because of a TMA relationship. As our theme last year was it starts with one connection, it does start with one connection, then you become part of something bigger in this world of TMA. But you build your brand through TMA and you build these trusted relationships and these relationships will give back to you if you spend the time and take the opportunity to be part of what the organization gives back to you.
Justin Bernbrock:
You mentioned NextGen, which I think caters to professionals who are earlier on in their career, younger than 40 or so. What other special or unique groups do the chapters offer such that somebody listening could hear, "Maybe that's a cool thing I could get involved with?"
Scott Stuart:
Let me start with NextGeners. Really proud of our NextGen community. It's powerful and empowering. And I can tell you that throughout the TMA system, NextGens are not only invited to participate but encouraged to participate. Many have risen to leadership roles before they're 40 years old. For example, the Chicago chapter, four of the last five presidents have been NextGeners. Think about that. Four of the last five presidents of a 900 person-chapter have been NextGeners. That a testament to how we support and reward our younger members. We give them opportunity and in seizing opportunity, they rise to the occasion and lead. And it's not just Chicago. New York as well has had three of the last five of its presidents, also a 900 person-chapter, rise to the level of president. Two years ago, we had a 35-year-old partner at a law firm, rise to president in West Michigan, all over the system. They're NextGeners who have risen.
The other affinity group that we have at MA is our network of women incredibly empowering, incredibly important, really setting the example and laying the groundwork for industry excellence. And we embrace diversity at the highest of levels, not only for women, but we offer free student memberships. We reach into inner city communities and junior colleges and colleges and try to teach people about opportunities in the restructuring profession, which tends to be very un-diverse, just by time and nature. And it's something we're really working on because we want it to be more open and more inclusive. Now granted, it's challenging because since it's a countercyclical industry, it's not one that, many times, people choose as an industry of first choice. Like myself, I think people still just fall into it because they're involved in a matter and all of a sudden they're sucked into the vortex of restructure, which they never leave. But we try to educate and be as inclusive as we possibly can to a greater demographic than what's traditionally been identified with the industry.
Justin Bernbrock:
And just building on that, I know that TMA boasts a fairly high percentage of members with diverse backgrounds. What have, in the five years that you've been with TMA, what types of things have you focused on to enhance or to promote the visibility of bankers, consultants, lawyers, et cetera, with diverse backgrounds within the organization?
Scott Stuart:
Let me start with the premise that it's challenging, because the profession is not particularly diverse. And that's by no fault of anybody. But we also want to create opportunities, so we've done several things. The free student membership is one very successful vehicle, which opens opportunities to students who may be interested. And we'll, like I said, we will go out to colleges, junior colleges, postgraduate programs, serving all communities to try to bring in as many students as we can and start to educate them.
We also, several years ago, started a diversity equity inclusion initiative, which started as a task force, became a standing global committee, is now... Next year, we will have our first vice president on the Global Executive Board of Diversity, Equity, and Inclusion. And we'll be publishing a playbook of better practices in terms of how we do outreach to be more inclusive. Our eye's on the ball, because we want to open the restructuring community to as many talented people of all backgrounds as we can possibly bring in. And look, we are people of the world, so we want to also send the message that we are societally inclusive and that we embrace people of all backgrounds, all genders, all races, LGBTQ+, et cetera. We want to be better, and I think we need to be better as a society. Through our organization and professional opportunity, we're trying to set the example and lead the way.
Justin Bernbrock:
It's certainly apparent to me when I have the opportunity to participate in the various TMA events. Another unique component of TMA is the issuing of awards in connection with transactions, which... Everyone wants to win awards. And I've been fortunate to be a member of teams that have won awards over the years, and it's always a really cool opportunity. And that isn't something that, when I think of some of the other organizations, they aren't specifically focused on recognizing the activities of its membership over the course of the year. Again, I think it's a really smart and creative way to recognize members, recruit new members, who I think have to become members to receive the award. Can you talk a bit about the awards program and how you've seen that pay off in terms of any anecdotal stories from award winners, folks that were otherwise involved with TMA who became involved by virtue of the program?
Scott Stuart:
Yes, absolutely. And let me position it this way. There are two ways to give awards. There's the giving of awards with the expectation that once the award is given that people are going to give back because they receive the award and there's giving an award recognizing what people have already given and invigorating them and motivating them to rise up because they've been recognized for the work they've already done. That is our philosophy. We have two different sets of awards. We have our Turnaround and Transaction awards, and then we have our chapter and individual awards. And particularly with our chapter and individual awards, we want to recognize excellence because excellence motivates people to even be more excellent beyond what they've already done. I have to say, I am incredibly proud and motivated by how our chapters, our individual members and leaders, rise to the occasion in such important ways.
Then when they are recognized, they then take the bar and they raise it higher, and that motivates everybody else around them to be energized by the opportunity that TMA represents. And likewise, we want to celebrate industry excellence with our Turnaround and Transaction awards. We want to invite those in the restructuring world who have really done important and great turnarounds to be recognized for the great work that they've done. As I've said, we want to recognize as a way to motivate, as a way to demonstrate how people who are affiliated with TMA are self-starters who are engaged with integrity and honesty and with true passion for what the organization is. I do every day, but I have to tell you, I'm only as good as the people who are engaged and how they engage. When I travel around TMA nation and I visit the chapters and I celebrate the people who are standing up and demonstrating the value of what it is to be part of this organization, it motivates me and my global team to create more innovative and positive ways to support the excellence that we're celebrating system wide.
Justin Bernbrock:
It's really interesting. Again, something that I don't really see many of the other groups doing, and if so, it's nowhere near as notable as my understanding of the TMA awards program. How about a few words about the impressive lineup of partners who have joined forces with TMA, sponsored numerous things? I was just on the website and the scrolling list of partners across the bottom of the screen is the who's who in restructuring and in turnaround these days. How have you developed that over your tenure? What would you attribute to the growing list of sponsors? I'm curious as to your thoughts there.
Scott Stuart:
We've worked very hard and very genuinely to demonstrate the value of the organization on multiple levels. Going back to what we talked about earlier, the diversity of the professional demographics that comprise our organization, the global resources that are available, the power of the brand at its continued growth around the world, the way that our members connect, and how we are always introspective, actionable, and making sure that we're raising the bar on member value. The fact that we don't grow stale. We're constantly making sure that we're in touch with the needs of our members and that the value of the brand is always first and foremost, and empowering and defining and showing value and creating experiences from the chapter regional, national, international, global level has demonstrated to our sponsors that they're getting the most visibility, the most value, and great feedback to themselves who are supporting an organization that continues to grow.
And the fact that we are the defining organization in the space, and we lead is demonstrated by the number of sponsors that continue to come in and support the organization. I can tell you over the last four years, we have exponentially expanded our global sponsorship base because people have come to realize that TMA is the defining brand in the corporate restructuring space. We are not that other organization. We are not that networking organization. We are the organization that provides the most member value in the most diverse way. We're corporate restructuring professionals.
Justin Bernbrock:
Speaking of some of the awards programs, and I do think this is a newer, although I guess, coming up on 15 years... But the industry Hall of Fame, and I see this year at the annual event next week, you're inducting my dear friend, Laura Davis Jones, as well as four others. Folks whom I know, Kelley Cornish, Jay Goffman, Bill Snyder, and Al Togut. It's interesting, Laura was honored last week in New York at the Tina's Wish event-
Scott Stuart:
Which I was-
Justin Bernbrock:
Yep. And she's a great-
Scott Stuart:
She's a rock.
Justin Bernbrock:
Great leader in the community. What has been the net effect of this notion of a hall of fame? And some level... I can hear Laura Davis Jones saying, "This just means I'm old and I've been doing this for a long time." But on the other hand, it's a very well-deserved recognition of her material and significant contributions for better part of three decades to this industry. Just curious to hear your thoughts on the practice of a sort of hall of fame or here are our industry luminaries, such as they are.
Scott Stuart:
Our theme for this conference, our 35th anniversary gala conference, which will be held in San Francisco next week, is lighting the way forward. You can't light the way forward without celebrating those that have laid the groundwork for the opportunities that now exist and will exist for the generation to come. And the concept of the Hall of Fame is to celebrate the standout luminaries, the defining people who have really been so impactful to our industry. And you mentioned Laura amongst the others, and Laura's a friend and has been for many years. These are people who stand up and stand out and really define industry excellence and have done groundbreaking things and groundbreaking and defining work.
So we celebrate them and we honor them in our Hall of Fame as we light the way forward for those who will follow and who those who will be inspired by what these people have done for our profession and how they have laid that groundwork or a world of opportunity that exists through TMA in our profession. And so the concept of the Hall of Fame, which we only do once every five years, is to choose a special class of five people who really stand out and define our industry and are people who we can learn from and celebrate. One of the wonderful things we'll be doing at the annual next week is we're going to have a panel with these luminaries where they're going to get to share their stories and their moments and the things, good, bad, and indifferent, that help form them as professionals and help them rise to the level that they are and how they define this industry and how they stand out.
It's a wonderful opportunity of celebration, not just for TMA and what it has become, but for the people who have really defined the wonderful world that is the corporate restructuring industry, while motivating and invigorating those who are newer to the industry and are just finding their own way through TMA and otherwise. It's going to be a real exciting show.
Justin Bernbrock:
Yeah, it sounds it. And with any luck, we'll push this podcast episode out next Wednesday, and so it'll be coinciding with the annual meeting and I encourage everyone who's interested to make their way to San Francisco next week.
Scott Stuart:
Honestly, one of the things we've done, particularly with our conferences, and this conference is a great example of it, is we've created so much... I use the term actionable optionality very purposefully, because there's something for everybody. You go back and you talk about how your organization has this diverse group of professionals. Just look at the programming we're doing at this annual conference on the 6th, next week, of October in San Francisco. Just a couple of examples of some of the programs. Municipal Rebirth. That is a topic that's talking about how are we going to rethink cities using restructuring professionals. We're going to have to rethink how we use commercial real estate and how we use retail space. We have to rethink things. That's not a hardcore legal topic or accounting topic. That's a topic that is applicable to the professionals who will going to help turn around America while at the same time, are people who just want to hear something interesting of societal importance. There it is.
We're going to do a DE and I program that is going to include an assemblywoman from Oakland, a professor from a university, a law firm DE and I leader, and we're going to talk about recent Supreme Court decisions. No, that doesn't have anything to do with restructuring per se, but it has something to do with the greater society of who we are. That's as important to our organization as anything else is.
We're going to do a panel on climate change and how climate change is affecting the economy. And that's an international panel where we're going to have a former president from Australia, we have ATMA Europe leader, someone from the US. I happen to be moderating that panel, so I'm stoked about it. But just shows you the real-world optionality that we tried to bring to the TMA experience. So whether you need it for credit or you're just interested because it's a cool topic, these are the kinds of things that make our conferences experiential.
Justin Bernbrock:
And I certainly have been on many occasions the beneficiary of the events that you all put on and they're truly great events. Transitioning a bit away from the TMA as such, and focusing instead on your experience as being a restructuring professional for over 30 years and what your observations have been, what's changed, what's the same? What is your macro perspective of the restructuring sandbox as it were?
Scott Stuart:
I think the profession has changed a lot over the course of my professional lifetime, but I think the last 15 years has been a particularly unusual period for us. After the 2008 financial crisis, there was just this period of absolute quiet spawned by basically free money, low interest rates, covenant light loans, things that had never been seen, and a lot of government support to make sure that economies weren't collapsing. There's never been a period of almost 15 years, we've never had natural counter cyclicality. That's just not natural. It's not natural, it's not healthy, it's not good, for a whole host of reasons, which can be a whole other podcast.
What you have now is, for the first time, we're going back to a much more natural period of counter cyclicality. Coming out of the pandemic, where again, we almost had another financial meltdown at the beginning of the pandemic, that again, was stopped because basically the world, every major country blanketed their economies with governmental subsidies to make sure economies didn't collapse and we didn't go into a depression. But all that did was elongated a very long and unnatural period of non-counter cyclicality, which is why you have zombie companies, which is why you have a lot of the issues today that are unfamiliar to people. But what stands out most to me is there is an entire generation of professionals that have never seen a blip in the economic cycle. This, where we're sitting today, looks horrible to a lot of people. A lot of young professionals have just never gone through normal ups and downs.
That's really difficult because from where I sit with 30 years of experience, what we're going through right now here in the United States isn't so bad. It's kind of normal. Yeah, inflation is probably a little higher than where it should be, but it's not obscenely high. Interest rates are blipping up to something more normal. Four, five, 6%. That's not abnormality. And I think what we're about to experience is a more natural rhythm of counter cyclicality.
Recessionary periods. People panic about recessionary periods. Well, mild recessions clean the economy. The fact that you have zombie companies became a thing in the last several years. Why? Because we haven't cleansed our economy. The challenge in the restructuring world right now is we're restoring something... Granted, there's new normals to what we're restoring, but we're restoring our economy and the worldwide economy to more normal economic cycles than the very elongated period we've been in. And that's going to be rough because you have a group of mid-level, and even some early senior professionals, who've never experienced it. The dynamics of what the restructuring environment was many years ago to what it is today is vastly different. Putting aside changes in laws and alternatives to Chapter 11 and all that stuff. I think at the core we need to get back to an understanding that restructuring is necessary, that recessionary periods are normal, that inflation and interest rates that were abnormally almost absent are coming back to something that makes a lot more sense.
Look, we have challenges coming our way. We're entering a period of a new industrial revolution where automation and digitalization is taking hold. We're going to a labor market that is going to forever be different than the 50-year period of the Baby Boomers, which is not a normal population cycle. Climate change is affecting economies, and the push towards zero carbon emission is going to put fossil fuel-based businesses into stress. There's a lot going on right now that's going to have to be managed. The landscape of the environment is much different than it ever was, but at its core, we are returning to a more counter cyclical cycle of life that we just haven't seen in almost a generation. Think about it. Almost a generation.
Justin Bernbrock:
It's very interesting. I am that generation in some respects, although my experience is a little skewed given the firm where I learned how to practice this, there was never any shortage of work in calls of Kirkland and Ellis. But it's interesting to think about, and I often make this comparison when I'm talking to folks who are not as familiar with the general corporate restructuring practice in the United States. It really is this value recycling system for our economy and has probably had a greater impact on enhanced economic development than many people recognize or realize.
Because just in the developed world, generally, the notion of preserving value through reorganization and trusting the personnel who took an enterprise or were for better or worse at the helm when the ship hit an iceberg, continuing to trust them to navigate to savor harbors is a really interesting and unique concept. I know other countries, of course, have more recently modeled their insolvency regimes based on ours, but none have the developed track record that we have. I'm very glad to hear the perspective that we are getting back into some version of economic homeostasis where this is just what we do. We as a restructuring and turnaround community writ large, we serve to recycle value in the economy. And that's how, in many respects, there's been such value creation in the United States.
Scott Stuart:
And to that point, very interestingly, one of the terms that we incorporated over the last several years in the definition of what TMA in the restructuring world meant is corporate health. Corporate restructuring, corporate reorganization, and corporate health. And people would say, "What do you mean by corporate health?" I say, "Do you go to the doctor? You're going to get a checkup when you're not feeling well or when you are feeling well?" "Yeah." "And if something's wrong, do you fix it?" "Yes."
We've moved far away from being the undertakers. That's not what we do. You're right, we create value, we restore value. But corporate health, hedging it early, getting to the problem early, sometimes even avoids the processes that we have to go through in a more dire situation. Sure, there's always going to be that patient that's going to be really sick and you're going to have to make really hard decisions about, but if you focus an aspect of what you do, and we do this at TMA on corporate health, on looking at it very early on and know that that is part of the restructuring rhythm and educating particularly younger people coming into the industry to be on the lookout for that and to training industry out there that if you see a problem... If you see something, say something. Get somebody in there and fix it early so that you don't get to that dire point. That's become more part of an understanding of our industry.
And to your point, particularly Europe, which had radically different restructuring processes from country to country, the pandemic accelerated the directive among other things that have made restructuring in Europe now more commonplace, a more competitive landscape, and an understanding that the words restructuring and bankruptcy are not bad words. The way they were perceived in places like England or Germany, or geez, it wasn't that long ago that in the UK, you can go to jail if you were going bankrupt. Or in Germany, where there were criminal implications. Now it's not like that. People understand the value of restructuring. To your point earlier, very similar to what early Chapter 11 work was like probably about the '90s and the early 2000s, before the reformation of the bankruptcy code. The world has come a long way in an understanding, but as part of that understanding corporate health is true.
Justin Bernbrock:
I think it's something that professionals in this space should focus on more, because... I'll often joke at meetings with partners, and I'm the last person that anyone wants to call, in any situation, and it's usually they've got one wing on fire and the plane is in a flat spin, and it's very difficult. Now we can and have recovered from some pretty ugly situations. It's never a particularly elegant landing, but you can recover. And I often say that I just wish folks would focus more, much, much earlier, because this is sort of the analogy of two... I'm a big aviation guy and spent 10 years in the Navy as a crewman on P-3 Orions, and so a lot of my analogies are aviation based.
But two airplanes leave Los Angeles on the same vector, and then immediately after takeoff, one adjusts just one degree to the right. By the time they get to the east coast of the United States, one's in New York and one's in Florida. And that's just one degree of difference over 3500, 4,000 miles. And not all companies or enterprises that face a perhaps endemic or industry-wide problem wind up having to go through a restructuring. And it must be, therefore, that whatever those companies that didn't have to go through a restructuring, they made some change or they instituted some practice or policy that enabled them to stave off going through a significant restructuring. Then I'm thinking back to the oil and gas exploration and production cycle of 1516, where there were a lot of companies that went through, but then there were some companies that didn't, and-
Scott Stuart:
Go back to the Europe, the auto industry meltdown. Who was the survivor of that? Ford. Because Ford brought in restructuring professionals when it had a war chest of money to be able to use to help it turn around. So it was the last automaker standing, because they did the smart thing and identified the problems that were coming, and during that crisis, they actually fixed it. So they didn't have to go through what GM and Chrysler ultimately went through. Ford was the survivor, Chrysler was the loser, GM had to go through the painful process, but it was interesting to see on that spectrum. One took corporate health seriously, one went away, and one, granted, it was a very unusual period, but one went through those natural processes. Right there lies the study of the spectrum of what restructuring can be about from the most dire to the most successful opportunity.
Justin Bernbrock:
If only we could convince more putative clients of the importance of focusing. I do like that phrase though, corporate health. I should probably be more intentional about doing my annual doctor visits, but as I tell my dentist, "If you don't go to the dentist, then you don't have any cavities." And he said, "Yeah, but then you have root canals."
Scott Stuart:
Yes, very true.
Justin Bernbrock:
Scott, this has been really terrific. I very much appreciate your coming by and spending some time. I wish you all the very best next week. I, sadly, am not able to be there. We do have one final question that we ask our guests, and that is assuming no limitations and setting aside what you are currently doing, what would be your ultimate dream job that you sometimes think about? It'd be really cool to do what?
Scott Stuart:
I'll answer it after saying this. I am in my dream job. I have to tell you that this last five years has been joyous, and it's made joyous because the members and leaders of the TMA community are engaged, connected, sincere, and absolutely loving of what they do for the organization and our profession. So let me start with that. Because I get to travel to most every chapter in this organization, and I am motivated, invigorated, and I'm better every day at what I do because of the people who do it on the ground. I thank the organization and I thank its members.
Other than that, I always wanted to be a weatherman. I love weather. I used to be that guy who pretended... When I was at the US trustees' office, I would actually have a map and do the weather every morning. So from weatherman, I became a-.
Justin Bernbrock:
There you go, yeah.
Scott Stuart:
By the way, I was also that kid who in the day before there were apps, I would track hurricanes by listening to NOAA Weather Radio, and then taking a T-bar on a hurricane map that I got from NOAA and track hurricanes. Every three hours, you get a NOAA report, so you'd be able to track the hurricane and see where it would land.
Justin Bernbrock:
Very interesting. There's very few professions where you can be just dead wrong a number of times, and people will tune in and they'll say, "What's the weather going to be today?" And it's sunny.
Scott Stuart:
The ideal weatherman job has to be in South Florida, where every day there's a chance of sun with a chance of a thunderstorm. And paid a lot of money for that.
Justin Bernbrock:
Yeah, no kidding. Well, great. Scott, thank you very much. It's been a pleasure and look forward to seeing what the TMA has in store for the coming months and years.
Scott Stuart:
Wonderful to be here. Thanks so much for the opportunity.
Matt Benz:
Hello again, everyone. This is Matt Benz with Sheppard Mullin for Restructure This! with this week's restructuring news. On October 2nd, Montana-based Barretts Minerals Inc. and an affiliated entity filed for Chapter 11 in the Southern District of Texas. BMI was formerly a Pfizer-owned minerals business that supplied talc for cosmetic products. As of the petition date, the debtors and some non-debtor affiliates have been sued in over 880 total cases, asserting talc claims and seeking damages for alleged exposure to asbestos-containing materials related to products reportedly containing talc sold by BMI. And over 555 total talc claims are pending, according to the first day declaration of BMI's Chief Restructuring Officer. BMI claims that it is entitled to indemnification against these claims pursuant to certain agreements with Pfizer, though BMI alleges that Pfizer has been unwilling to provide comprehensive indemnification in the face of mounting potential liability exposure. According to a press release issued by BMI's parent company, Minerals Technologies Inc., BMI's goal in Chapter 11 is to address and comprehensively resolve BMI's liabilities associated with talc.
In recent out-of-court news, WeWork has elected to withhold approximately $95 million in interest payments due to bond holders this week as the New York based coworking company looks to restructure its debt. WeWork said in an SEC filing on October 2nd, that "While the company does have the necessary liquidity to make the interest payments, withholding will maintain the company's liquidity as it implements its strategic plan, centered around rationalizing its real estate footprint and improving its capital structure." WeWork announced in August that it was taking strategic action in effort to become more profitable by renegotiating unfavorable lease terms with landlords and leaving certain uncommercial locations altogether. WeWork has a 30-day grace period to make payments before failing to do so would constitute an event of default.
That's it for this week's restructuring news. This has been Matt Benz of Sheppard Mullin for Restructure This! Until next time, thank you for tuning in.
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