Money managers are snatching up Wall Street talent left in a void as banks out to refashion their business models shed assets, cut costs and rein in risk. The latest example: Third Avenue Management has hired David Resnick, who has 27 years of experience on Wall Street, most recently leading Rothschild’s restructuring and debt and equity advisory businesses, as president. Third Avenue was founded by value manager Martin Whitman, a banker himself before starting the firm in 1986. The firm advises the Third Avenue Value Fund and four additional funds in small-cap and international equities, real estate and credit as well as alternatives and separate accounts.
In addition to expanding its alternatives business and assisting a focused credit fund launched in 2009, Resnick told Institutional Investor in an interview that he expects to help Third Avenue find deals ignored by banks as Wall Street scuttles services such as dedicated desks for distressed investments.
Sourcing potential deals has become more challenging as a result, says Resnick. Before the financial crisis, he notes, the big banks’ trading desks called with potential investments every day. Without that, money managers need to understand workouts and know turnaround people in the broader restructuring community to source deals. Third Avenue then can approach troubled companies with offers of capital to fix balance sheets.
“If you’ve done this business for a long time, you can remember how the distressed trading business started,” says Resnick. “Bank debt trades were negotiated; there were no big trading desks to buy debt. And the same was true for high yield,” he emphasizes.
With banks pulling back, Resnick believes many of the opportunities for Third Avenue will be found among midcap companies that don’t have larger companies’ ability to refinance.
With that in mind, Third Avenue also is partnering with some outside firms. Last year it invested in Jim Millstein’s Millstein & Co., a restructuring advisory firm. Millstein was the Treasury Department’s restructuring chief from 2009 to 2011. Before that he was global co-head of corporate restructuring at Lazard.
Resnick says Third Avenue is well positioned to exploit banks’ pullback from distressed and other fixed-income trading. The firm, he says, has always been “a fundamental analysis, roll-up-your-sleeves kind of firm.” And he adds that that has already helped Third Avenue “understand where the value is, understand the business, the risks, commit our capital and be willing to see a situation through.”
Resnick decided to make a switch to the buy side after sending his youngest off to college a year ago. Some of his transactions on Wall Street include advising the board of American International Group in its restructuring with the U.S. government, American Airlines, Delphi Corp. and the creditors of Eurotunnel.
Resnick, who founded the restructuring group at Peter J. Solomon before joining Rothschild in 2000, points out that Wall Street hasn’t completely reverted to the old days. “We haven’t gone back to the beginning,” he says. But he notes in the early days of distressed investing, investors had to have a deep understanding of the process because there was little liquidity and no easy way to sell positions. Today, he adds, “the lack of liquidity means that firms without restructuring experience won’t participate in certain names.”
