As the financial and economic crisis exacts a rising toll on the profitability of corporate America, growing numbers of companies are eagerly looking for help in restructuring their finances. Just ask David Resnick, head of global restructuring at investment bank N M Rothschild & Sons.
His clients include auto-parts maker Delphi Corp., of Troy, Michigan, which has been in bankruptcy for four years, as well as Salt Lake City–based chemicals company Huntsman Corp., which has been struggling to regain its footing since the failure of a buyout offer last year. Resnick, 49, also is co-chief of investment banking for London-based Rothschild. Members of his team are advising the U.S. Treasury on hot, politically sensitive cases, including its evaluation of restructuring proposals for General Motors Corp. and Chrysler, as well as the Treasury’s $5 billion rescue of the auto-parts industry.
His handling of difficult situations has earned Resnick, who is based in New York, the admiration of clients and rivals. For example, in late 2005 he persuaded feuding union and company officials at Delphi, a former GM subsidiary that still receives pension funding from its onetime parent, to agree on a cost-cutting maneuver in which 13,800 employees elected to retire or take a buyout. Harvey Miller, a lawyer at Weil, Gotshal & Manges who advised GM during the buyout talks, likens Resnick’s diplomatic skills to the deft touch of Henry Kissinger in helping to reopen ties between the U.S. and China in the early 1970s. Says John Sheehan, chief financial officer of Delphi: “David was able to calmly think through the highly contentious situation and clearly articulate solutions for the transition from where we were to where we wanted to be. If I were to hire someone today, I would make exactly the same decision.”
With a JD and an MBA from the University of Chicago, the Baltimore-born Resnick learned about complex credit transactions by restructuring high-yield deals at Merrill Lynch & Co. in the 1980s. He worked on a debt restructuring of the now defunct Seaman Furniture Co., where he learned that interpersonal issues can be as important as financial analysis. His work on the American Healthcare Management bankruptcy taught him that “some management teams often do not respond quickly enough to changes in their business models, and how important it is always for companies to have a good sense of their cash positions” as well as the “big picture.”
At Rothschild, Resnick spends the bulk of his time advising clients. The bank has close to 100 restructuring bankers around the world. Resnick plans to expand his ranks cautiously, taking advantage of the rush of departures by seasoned bankers from institutions entangled with the government. He envisions Rothschild as a bigger and more aggressive firm. It ranked tenth in global M&A revenue in 2008, with $569 million, according to research firm Dealogic.
Rothschild is the sole bank advising the Treasury on the future of GM and Chrysler. That’s testimony to the firm’s reputation in the restructuring business, where industry experts say it is considered part of an elite that includes the Blackstone Group and Lazard.
The turmoil in the financial markets has been particularly brutal for companies that need to restructure, says Resnick. He’s working with Huntsman on its continuing dispute with banks that backed Hexion Specialty Chemicals’ failed $6.5 billion buyout of Huntsman. Huntsman received a $1 billion settlement from Hexion in the dispute, for which Resnick provided court testimony. Huntsman has sued the banks in a second case that is pending in Texas. “To find capital you need to be creative in structuring the deal and be willing to pay a high price,” Resnick says.
His team showed just such creativity recently in helping VeraSun Energy Corp., one of the largest U.S. ethanol producers, get the debtor-in-possession financing it needed to file for Chapter 11 reorganization after the commodities bubble burst last year. Working on behalf of the Sioux Falls, South Dakota–based company, Resnick’s team negotiated $196.6 million in DIP financing from senior secured noteholders, including American International Group, who rolled up $103 million of existing notes. VeraSun, which was struggling with $1.4 billion in long-term debt, liquidated its assets last month by selling seven plants to Valero Energy Corp. of San Antonio, Texas, for $477 million and six plants to AgStar Financial Services of Mankato, Minnesota, for $324 million. “We will see more defaults in 2009, given the lack of refinancing alternatives for companies,” Resnick says.
