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
Chapeau, Sombrero or Fedora: A Lively
Discussion About What Hats Investment Bankers, CRO/CRAs and Turnaround
Consultants Are and Should Be Wearing. How do you determine whether you
have the right professional for the job? This panel will address the
distinction between financial advisory professionals hired, or
recommended by, financial institutions and the roles they play at
various points throughout a chapter 11 proceeding. Particular attention
will be focused on the inherent conflicts that arise among these
professionals as the lines among their service offerings begin to blur.
Peter S. Kaufman, Gordian Group LLC, will moderate, and the panelists
will include James D. Decker, Houlihan Lokey Howard & Zukin and
Michael J. Epstein, TRG.
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
Becky Roof, Chairman
Topics discussed included:
- Interest in future program topics, including:
- What is an appropriate business model for a financial advisory firm
in a declining business environment?
- Interest in combining a program with banking & finance
- Agreeing that committee work should be done outside of committee
- Completing unfinished Committee projects:
- Model retention agreement
- White paper on service differentiation
- Establishing a newsletter
- Establishing a system of emailing to members updates on "hot
- Developing a pre-filing checklist
2003 Annual Spring
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.
- Robert Keach discussed the success of the News at 11 column in the
ABI Journal and solicited authors with an interest in producing work for
that column. He indicated that, at least at present, the editorial
slots were filled but indicated that the editors were responsible for
providing, not necessarily writing, the column for the months they had
been assigned. Interested authors were asked to contact Robert
Keach at 207-228-7334or firstname.lastname@example.org or Anthony
Schnelling at 212-207-4710 or email@example.com.
Any topic related to the business aspect of the reorganization practice
will be welcome and the editors will be encouraged to find a slot for
- Next Robert Keach discussed the need for both authors and editors
for the E-Newsletter the committee produces each month. Interested
participants were encouraged to contact Robert or Anthony as the
committee is trying to build on its early success with this vehicle and
get a panel of editors in place. Content for this publication is
much more informal than for a Journal piece. A case note on an
interesting and cutting edge decision, a topic of relevant interest
involving problems related to DIP financing, case management, plan
creation and confirmation are all sources of material which would be of
interest to members of the Committee. These need only be a few
informal paragraphs as the formatting and production is handled by
Caroline Milani and the rest of the able staff at the ABI.
Educational Program – Emergence of the Chapter 363
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’
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
- Creation of an engagement letter with the tasks, responsibilities
and compensation clearly spelled out and agreed;
- Definition of goal with the client – usually achieve highest
and best price for the assets. The factors involved in this
- How to maximize certainty?
- What kind of consideration is wanted (stock/cash/other)?
- Encouraging the client to realize that cookie cutter solutions do
not exist in reorganization.
- Define the time line.
- 30 days too little to do a good job
- 90 days is an excellent amount of time
- 60 days is probably the optimum time frame
i. Factors involved here are:
ii. How much liquidity does the client have?
iii. What kind of relationship does client have
with its lenders?
- Building Blocks for sale process are:
- Define the buyer population
- Assemble due diligence and marketing materials.
- Organize an effective due diligence process.
- Keep competitive dynamic effective through closing.
- Prepare draft contract.
- Identify key problems – key contracts to put out for potential
buyers to review.
- Prepare and circulate confidentiality agreements:
i. How valuable are these?
ii. How much time does one have to accomplish the
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
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
- Issues to be aware of:
- Ist week decisions are critical
Info flow internally may affect quality of Confidential Offering
Building consensus with management or with crisis manager, if any, is
key to getting good data together quickly for COM.
- In draft APA, consider what protections the debtor may (i) want or
(ii) have to offer buyers.
- Is the buyer universe likely to be strategic or financial
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?
- Work with management and crisis manager, if any, to define roles and
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
- Does the deal require an LOI (Letter of Intent ) stage? If
time is short going straight to contract is often more effective.
- Maintain multi-track process
Identify best potential buyers
Identify price levels
Negotiate contracts simultaneously. Keep an eye on the need for
apples to apples contract provisions.
- Identify strategic and tactical considerations of what asset
groupings the debtor wants/needs to sell or hold.
- Identify any potential buyers in the “Home Boy Shopping
Network” (those with explicit or hidden sweetheart follow on deals
with long term management)
- How open does the process need to be to maximize value and how to
maintain a level playing field.
The discussion then shifted to the role of Fairness Opinions as part
of a sales transaction in or out of bankruptcy proceedings.
- Fairness Opinions – Peter Kaufman explained that outside of
bankruptcy “fairness opinions” are routine and it is easy to
understand that, in a litigious marketplace, boards of directors and
officers of both buyers and sellers want the comfort that assets they
are buying or selling are being traded at a price which is fair to their
constituents. Some obvious reasons are:
To avoid fraudulent transfer challenges in a future bankruptcy or under
validate value so as to ensure the full protection of the “prudent
man rule” and protect indemnification rights.
To gain a level of comfort that the price is indeed fair in and of
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
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.
- Conducting the Auction Process
- It is important to have auction procedures in place and blessed by
the Bankruptcy Court well in advance of the auction. The bid
procedures are routinely blessed by the court but often the actual
procedures for running the auction (timing of bids, interaction between
bidders, closed or open process) are left to the debtor’s
discretion and the buyers don’t have enough time to set their
strategies accordingly. Also, some courts have definite views on
auction issues and it is best not to be in court on an emergency basis
fighting over the procedures for running the auction on the day of the
- On the Auction Day it is critical to provide
i. Maximum flexibility to the buyer
Maximum flexibility to the seller
- Auction Day Issues include
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.
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.
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
2002 Winter Leadership
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
The meeting adjourned at 9:15 AM.
2002 Annual Spring
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
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
2001 Annual Spring
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.
Anyone interested in pursuing these issues should contact Peter
or Andrew Miller (firstname.lastname@example.org).
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.