Taking the driver’s seat
In a year when restructuring specialists were in demand, advisers needed to rise to the challenge to help clients manage emergency negotiations with creditors. For being the first in line to advise with aplomb on rescue situations, PJT Partners is IFR’s Restructuring Adviser of the Year.
In a year when restructuring specialists were in demand, advisers needed to rise to the challenge to help clients manage emergency negotiations with creditors. For being the first in line to advise with aplomb on rescue situations, PJT Partners is IFR’s Restructuring Adviser of the Year.
When the world is falling apart, restructuring shops are there to pick up the pieces. So it was in 2020 when the coronavirus pandemic shuttered the global economy, pushed strong companies to the brink and weak companies over the edge.
Almost every firm was busy in 2020 but the best were able to manage their usual roster of traditional distress assignments and at the same time juggle unexpected rescue work to drive transactions over the finish line. No group did it better than PJT Partners.
Blackstone’s legendary restructuring shop was rebranded PJT in 2015 after it merged with the M&A advisory boutique formed by Paul Taubman. That restructuring group morphed into the more powerful outfit that was on full display this year.
“We like to take on stakes that are going to be the fulcrum,” said Steve Zelin, head of restructuring and special situations at PJT, who has been in charge of the Americas region since 2017. “We want to drive outcomes.”
The largest transaction of 2020 showcased that drive perfectly. When Californian utility PG&E filed for bankruptcy with US$30bn in liabilities from wildfires sparked by its equipment, PJT represented equity holders. At first glance they did not seem best positioned to drive an outcome.
“We knew it was going to be a solvent debtor based on any reasonable view of what the damages would be,” said Zelin.
Along the route to restructuring, PJT had to battle bondholders, looking to reap a payout far beyond what they were owed, and the state of California, with politicians trying to score points off each other.
Most importantly, the firm had to negotiate a settlement with victims of fire damage cause by PG&E. Adding to the already complex situation, distressed investor Elliott Management also made a play for the company, competing with equity holders and so driving up the price of their paper.
Laurie Fitch, an advisory partner at PJT specialising in the power industry, was paired with the restructuring team on the deal. She called it the most difficult deal of her career. The deal was close to being concluded when the coronavirus pandemic hit in March.
Be nimble, be quick
At that point, businesses affected by public health restrictions rushed to engage experts to advise on how to stay afloat – if necessary, by negotiating with their creditors.
Debt workout deals can be laboured but these situations required the firms to operate at double-quick speed. Unsurprisingly, the overall value of completed restructurings more than doubled to US$421bn in 2020 from a year earlier, according to Refinitiv, as deals were concluded rapidly.
The total would have been much higher but for the emergency measures taken by central banks, which instead meant that many ailing businesses were able to refinance their liabilities rather than having to restructure them.
PJT was particularly adept at catering for the increased demand for restructuring services during the peak of the first wave. The firm rose to the challenge across the globe, working on a wide array of deals including an impressive roster across Europe, the Middle East and Africa.
“It was our busiest year so far,” said Martin Gudgeon, head of restructuring and special situations across EMEA for over a decade. “Restructurings were more complex and occurred at a pace that was not normal. There were just so many of them.”
He said revenues for his unit were double those of any previous year, including when PJT was part of Blackstone.
“Deals that in a pre-Covid world would take between six and nine months were getting done in six to nine weeks,” said Tom Campbell, a partner at PJT. “You basically had to solve balance sheet problems, raise money and do it yesterday.”
One victim of the coronavirus restrictions was Cineworld. The cinema chain, which had grown in both the US and Europe over a number of years through acquisitions funded by debt, required a series of procedures to survive.
The company first engaged PJT soon after the pandemic forced it to close its entire chain of 787 cinemas. With US$4.9bn of debt outstanding, lenders were initially reluctant to provide further facilities but PJT succeeded in arranging a US$250m secured line from a syndicate of private institutions in June.
That was only the first part of PJT’s work. It then started negotiating with creditors about extending their loans at the same time as raising further facilities, all in the knowledge that if talks failed the existing shareholders, which included a substantial stake held by the management, would lose control in a Chapter 11 process.
In October, a US$450m three-year loan was secured from the existing creditors to prevent this, in addition to US$300m of other liquidity being provided.
“Cineworld was about engaging the existing creditors, making them come to the table to keep the business out of Chapter 11,” said Mike Wilcox, a partner at PJT.
Another notable deal was the US$3bn restructuring of Norwegian oil rig provider Solstad Offshore, the largest ever in that jurisdiction. PJT played a critical role in the complex process, representing a group of 18 financial institutions that were critical in the deal’s successful implementation.
Solstad’s corporate structure was greatly simplified as more than 50 credit facilities were restructured as well as €1bn-equivalent of debt swapped for equity and a new €140m super-senior facility installed.
On the company side PJT acted for UK vending machine operator Selecta’s €1.7bn restructuring. Once again this was a business hit by coronavirus restrictions. After revenues dropped 30% in the first half, PJT organised a recapitalisation plan with a range of creditors as well as owner KKR, which agreed in October to inject €125m of capital.
PJT was engaged more frequently by debtors across EMEA. This is usually the most sought-after role in a restructuring and the fact PJT was appointed in so many situations over the last year, often without having to pitch, was a testament to its skill in assisting stressed companies.
It worked for Irish travel technology provider Cartrawler on a US$163m workout as well as Dutch property company Global City Holdings on a US$704m deal, and a US$2.5bn refinancing for UK financial firm Lowell.
Human spirit
On the creditor side it acted for an ad hoc committee of first-lien holders on a US$495m deal for Dutch healthcare group Curaeos and creditors of UK engineering company Doncasters to restructure its US$1.1bn of debt.
At Ligado Networks, a wireless network company facing significant 2020 maturities but only retaining a month’s worth of liquidity, PJT represented a group holding US$6bn of second-lien paper. That group effectively allowed the restructuring of the balance sheet, helped by innovative negotiations with hedge fund manager Phil Falcone.
In these critical situations and others, bankers found they could work with a speed never before imaginable and still form close working relationships with companies and creditors in crisis situations, even without having met them. “Humans are very adaptable,” said Campbell.
For all of the frenetic energy around restructuring from March to September, the year ended with an eerie calm. Easy access to credit, or at least liquidity facilities, provided a bridge to the other side of the crisis brought on by the coronavirus.
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