Investment Banking Committee Meeting Minutes
2006 Winter Leadership Conference
The Technology and Telecom Committee held a joint meeting with the Investment Banking committee at the Winter Conference. Under the revised charter of the Technology and Telecom Committee, the subject of the meeting was Virtual Data Rooms. The panel consisted of members of both committees and invited industry experts. The panel was very well attended and there were two $500 certificates given to all attendees of the meeting toward the purchase of a virtual data room.
2004 Winter Leadership Conference
The committees will be teaming up with Finance and Banking to present
2003 Winter Leadership Conference
The Investment Banking Committee participated with the Financial Advisors Committee in a program entitled "Turf Wars among Restructuring Professionals—Who's On First?" on Friday morning. Becky Roof and Claudia Slacik participated as panelists.
A committee meeting was held on Saturday morning. In attendance were:
Becky Roof, Chairman
Topics discussed included:
The meeting was called to order at 8:30am and Robert Keach advised the attendees that the educational program was a joint presentation by the Business Reorganization Committee and the Investment Banking Committee. He then introduced Anthony Schnelling, co-chair of the Business Reorganization committee and welcomed Peter Kaufman, co-chair of the Investment Banking Committee.
Educational Program – Emergence of the Chapter 363 Case
Robert Keach outlined the premise that more and more cases are apparently being filed with the specific purpose of organizing and consummating a sale or sales of all or substantially all of a debtors’ assets through a Section 363 sale under the auspices of the Bankruptcy Court. He pointed out that this has been fairly common in the hi-tech, dot com and telecom industries in recent years. He also pointed out that, notwithstanding Lionel, most courts have routinely approved these sales even though they commonly leave little for a debtor to accomplish through its plan but the liquidation of the proceeds left behind after the sale and the litigation remaining to the debtors and the unsecured creditors’ committees.
This trend has raised the level of importance of the Investment Banking function in the reorganization practice. He asked Peter Kaufman to talk to the nuts and bolts issues and concerns of investment bankers pre- and post – petition and to discuss how he prepares a debtor for a sale and manages the process. Peter Kaufman then discussed the investment banking process, without making specific distinction between pre – and post – petition engagements.
i. Factors involved here are:
ii. How much liquidity does the client have?
iii. What kind of relationship does client have with its lenders?
i. How valuable are these?
ii. How much time does one have to accomplish the sale?
iii. How hard to get agreed.
iv. How to resolve the internal questions which will get asked regarding “sharing information with competitors bidding in the 363 process” and how to clarify their motivation – competitive research or genuine interest in the assets or both?
v. Be aware of the collateral issues that potential buyers may also be trading claims and consider asking all 363 participants for a standstill on claims trading.
vi. How tight Confidentiality needs to be depends on the context
1. is a sale the only option?
2. could the company emerge as a stand alone entity from bankruptcy?
3. How valuable is raw data to potential competitors?
i. Info flow internally may affect quality of Confidential Offering Memorandum (“COM”)
ii. Building consensus with management or with crisis manager, if any, is key to getting good data together quickly for COM.
i. Short time frame drives process to strategic buyers because they know the industry and the deal (especially the warts).
ii. How critical is it to attract financial buyers to get maximum value and how can this be accomplished?
i. Who will run the business (no value will remain if everyone focuses on the sale and the business collapses)?
ii. Who will assist the investment banker with the sale process – due diligence, negotiation, sourcing potential buyers?
i. Identify best potential buyers
ii. Identify price levels
iii. Negotiate contracts simultaneously. Keep an eye on the need for apples to apples contract provisions.
The discussion then shifted to the role of Fairness Opinions as part of a sales transaction in or out of bankruptcy proceedings.
i. To avoid fraudulent transfer challenges in a future bankruptcy or under state law.
ii. To validate value so as to ensure the full protection of the “prudent man rule” and protect indemnification rights.
iii. To gain a level of comfort that the price is indeed fair in and of itself.
In a bankruptcy proceeding it is more difficult to understand the need for this form of assurance and protection for boards of directors and officers of selling debtors. There was an extensive discussion, with much audience participation, regarding the purpose of a 363 sale – cleansing the assets of unwanted liabilities and getting court approval for the process. The whole concept of requiring a Judge to validate the debtor’s decision as to the highest and best bid appears to immunize directors and officers from liability and obviate the need for a “fairness opinion”.
Robert Keach offered for consideration the fact that investment bankers in cases he is in have been asked recently for “fairness opinions” in a 363 context notwithstanding the immunizing value of a bankruptcy court order. Anthony Schnelling offered the thought that in this context a “fairness opinion” might act to validate the process engaged in by the officers and directors of the debtor and assure them that their actions could not be attacked in that context. There was a general sense of the meeting that this might be a valid reason to use and request a “fairness opinion” in the context of a 363 sale but that such opinions were of little use to anyone for a validation of the value of a transaction once a court had ruled on the fairness of value. Keach indicated and Kaufman agreed that the context in which they have seen or considered such opinions did relate to the process aspects of the sale and offered the thought that these opinions were and should be heavily qualified to be entirely fact specific:
i. under existing circumstances
ii. considering existing liquidity
The thought was offered from the floor that if such opinions were to be requested they should be bargained for in the engagement letter process with the investment banker because no banker would give this sort of opinion in this context without very specific parameters agreed in advance. To request such opinion during the process was likely to meet with a refusal or an exorbitant fee.
i. Maximum flexibility to the buyer
ii. Maximum flexibility to the seller
i. Open outcry auction?
ii. Sealed bid auction?
iii. All participants meet together at all times or can there be provate interactions?
iv. How to deal with the instantaneous valuation issue particularly when there bids which differ as to price, payment terms, contract terms, etc.
v. How to value non cash component of bids?
1. Get opening bids from all potential buyers in advance to assist the debtor to understand any non-cash component prior to the auction taking place.
vi. How does one recognize and deal with collusive bidding or side deals
vii. Make certain creditors’ committee representatives are part of the process, especially if they are out of the money
The participation from the floor was lively throughout. Questions were not held till the end, but were entertained and answered during the flow of the discussion
There being no more business, Robert Keach offered thanks to Peter Kaufman for his excellent presentation and thanked the attendees and the panel for their participation. The meeting was adjourned at 9:30 am.
The Committee on Investment Banking, Corporate Finance and M&A met on Dec. 6, 2002, at 8:00 AM. There were 12 attendees. Peter Kaufman of Gordian Group LLC, Co-Chair of the Committee, and Matt Niemann of Houlihan Lokey Howard & Zukin LLC, were the moderators.
There was a discussion of indemnity issues relating to investment banks, and of the state of the law (including the disparity amongst jurisdictions and inconsistency among firms). There was a discussion of "market" protections commonly available to investment banks in non-distressed situations and the applicability of these market provisions to chapter 11 retentions. A suggestion was made that this committee seek an audience with the U.S. Trustee's Office in Washington, D.C., to discuss the matter.
There was a discussion of investment banking "opinions," and when a Board of Directors might require opinions in respect of fairness, valuation and solvency—and whether circumstances might exist in chapter 11 settings where such opinions might be appropriate. The LaSalle decision, and implications for the need (if any) for opinions, was also discussed. The Sarbanes-Oxley legislation, and implications for directors in insolvent situations as it relates to opinions, was also discussed.
There was a discussion of break-up fees—when permitted, how computed, etc., and the disparity among jurisdictions. This broadened into a discussion of the circumstances under which break-up fees (and attendant buyer protections) should be granted.
An invitation was extended to audience members to write articles or brief summaries of the issues discussed at the committee meeting—or any other topics of interest relating to investment banking. The moderators each committed to identifying a topic to be written on.
The meeting adjourned at 9:15 AM.
The Investment Banking Committee of the ABI met at 8:30 am Sunday April 21, 2000 at the Annual Spring Meeting of the ABI. Given the number of attendees (two), the discussion focused on the needs, concerns and questions of the participants as it related to investment bankers in financial restructuring.
In particular, we discussed the role that investment bankers can play in managing the sales process of a debtor and how investment bankers can assist a debtor in maximizing value. We discussed the role and value of investment bankers in the context of various sales scenarios under § 363 of the Bankruptcy Code including emergency sales and sales with a stalking horse.
We also discussed the current climate and types of deals that investment bankers were involved in today. Specifically, the conversation focused on the kinds of cases that were being filed, hypothetical solutions to those types of cases, and the general financing environment. We discussed which cases might be amenable to a reorganization of their capital structure and which might be more appropriately suited to the M&A process. We discussed the types of attitudes we were seeing from the traditional constituencies in these cases, including secured lenders and bondholders.
A robust Q&A session ensued. Although attendance at the meeting was light, we covered thoroughly a number of issues that lawyers and investment bankers were experiencing in the current bankruptcy environnment.
James Garrity (Shearman & Sterling, New York City), Hon. Erwin Katz (N.D. Ill; Chicago) and Peter Kaufman (Gordian Group L.P., New York City) had a discussion about the engagement of investment bankers in insolvencies. Topics discussed included (i) when the need for an investment banker arises, (ii) methods of payment, (iii) standards for employment in bankruptcy court and (iv) scope of work and skills provided by investment bankers, compared to other insolvency professionals such as crisis managers and accounting firms.
There was also a discussion previewing the upcoming New York City June 18-19 conference on Workouts, Restructurings and Transaction Alternatives: The Role of the Investment Banker. This conference, the ABI's initial conference focussing on investment bankers and their role in insolvencies, promises to be a major event and will provide insights for any insolvency professional interested in learning more about (i) what it is that investment bankers do, (ii) what skills they bring to bear to solve financial challenges, (iii) how the services they provide differ from other professionals and (iv) how investment bankers work with other professionals.
The roster of speakers is a blue-chip list of the nation¹s leading investment bankers, attorneys and accounting firms, together with keynote speaker Prof. Robert Shiller, author of "Irrational Exuberance." The conference will have broad educational and networking appeal to insolvency professionals around the country.