Surviving in an economic downturn

Surviving in an economic downturn

Chair: John Wm. Butler Jr. Skadden, Arps,

Slate,Meagher & Flom LLP

Alistair Dick, Rothschild

Simon Freakley, Zolfo Cooper

Adolfo Laurenti, Mesirow Financial

Dr. Nasser H. Saidi, DIFC and Hawkamah

• Experiencing worst financial/credit crisis in more than 70 years

• Regional financial market turmoil has spilled over to the broader global economy, leading to significant uncertainty and volatility

• Coordinated global governmental measures have had some effect on thawing credit conditions, have begun to stabilize credit markets and have stemmed the systemic failure risk in the global financial system

Global Economic Outlook

What We Don't Know

• Long-term consequences of this crisis

• Impact of consumer savings and de-leveraging

• Impact of growing crisis in commercial real estate market and structured credit card syndication conduits

• Business reactions to crisis

• Collateral consequences of government intervention and "quasi" nationalization

• Timing of recovery

Global Economic Outlook

• Despite improvements in capital markets over the last six to nine months, significant challenges remain for many corporations with near- and medium-term debt maturities

• Hundreds of billions of dollars of bank debt, high-yield debt, and commercial real estate debt is scheduled to come due between 2010 and 2014

• Exacerbated by the financing boom that peaked in the middle of the last decade

• Potential solutions: – “Amend-to-extend” transactions– Covenant relief amendments and refinancings– Exchange offers– Prepackaged or prenegotiated reorganizations and insolvency

cases (including sales and other change of control transactions)

The “Wall of Debt” Ahead

““The Best The Best of Both of Both

Approaches”Approaches”

LBO FundsDistressed

Hedge Funds• Prefers medium to long-term

investments:• Less comfortable with buying

distressed debt without certainty of attaining ‘blocking’ position

• Concerned about contentious restructuring situations

• Pays up for control

• Pays higher multiple for management

• Extensive usage of financial leverage with significant equity commitment

• Conducts extensive due diligence, often with access to management and non-public information

• Longer lead time

• Excels at short to medium term trading of distressed debt securities

• Does not require control

• Does not pay a premium for management

• Requires little to no equity contribution

• Makes investment decisions based on publicly available information

• Quick turnaround

Approaching Distressed Investing from Different Private Equity Angles

Distressed Investing

Developed, efficient market

Currently developing

Early stages of development

Undeveloped

Developed, efficient market

Currently developing

Early stages of development

Undeveloped

Stages of Global Development in the Distressed Debt Market

A Distressed Debt Primer

9. ReorganizationLegal documentation and implementation

8. Investor FatigueConsensus based on pro-portional sharing of pain

7. Core Business PlanLeads to an outline of a

Reorganization plan

6. Investor DespairIt is always worse and morecomplex than they thought

5. Creditors OrganizeDue diligence commences

4. Further ErosionLeading to admissionof a serious problem

3. Management DelaysSeeks an internal solution

2. Crisis EventRising management

awareness of distress

1. Financial DeteriorationOften without full

management awareness

Different Stages in the Distress Cycle

Cash Conservation and Supplemental Liquidity

Measures

Assess Non-Strategic Businesses

and Assets

Restructure/Retire Loan

and/or Note Obligations

Consolidation/Strategic Transactions

Additional Financingor Equity Infusion

Human Capital Initiatives

Potential Strategic Platforms

Creditors' Committee

Creditors' Committee

Government Agencies

Government Agencies

Government Investigations

Government Investigations

Strategic Partners

Strategic Partners

SuppliersSuppliers

CustomersCustomers

Lenders / Steering

Committees

Lenders / Steering

Committees

Litigation Plaintiffs

Litigation Plaintiffs

Salaried Employees

Salaried Employees

UnionsUnionsAd Hoc Equity Committee

Ad Hoc Equity Committee

Equity CommitteeEquity Committee

Ad Hoc Trade Creditors

Committee

Ad Hoc Trade Creditors

Committee

Indenture Trustee

(sub. debt)

Indenture Trustee

(sub. debt)

Indenture Trustee

(Senior Debt)

Indenture Trustee

(Senior Debt)

Ad Hoc Bondholders Committee

Ad Hoc Bondholders Committee

Plan InvestorsPlan Investors

Rights Offering Standby

Purchasers

Rights Offering Standby

Purchasers

Stakeholders

Company

Surviving in an economic downturn

Chair: John Wm. Butler Jr. Skadden, Arps,

Slate,Meagher & Flom LLP

Alistair Dick, Rothschild

Simon Freakley, Zolfo Cooper

Adolfo Laurenti, Mesirow Financial

Dr. Nasser H. Saidi, DIFC and Hawkamah

When the bank goes bust: Rewriting the rulebook

11.30am – 12.45pm

Microsoft Office PowerPoint 97-2003 Pres

Conference Co-Chair

Dr. Nasser H. Saidi DIFC and Hawkamah

When the bank goes bust: Rewriting the rulebook

When the bank goes bust: Rewriting the rulebook

Chair: Peter Spratt, PricewaterhouseCoopers

Edward Middleton, KPMG

Christopher Mirick, Cadwalader, Wickersham &Taft LLP

Rutger Schimmelpenninck, Houthoff Buruma

When the bank goes bust: Rewriting the rulebook

Chair: Peter Spratt, PricewaterhouseCoopers

Edward Middleton, KPMG

Christopher Mirick, Cadwalader, Wickersham &Taft LLP

Rutger Schimmelpenninck, Houthoff Buruma

Government intervention or interference?: State aid to financially troubled companies

2.00pm – 3.15pm

Microsoft Office PowerPoint 97-2003 Pres