Banker's Perspective Helps Turnaround Artist

From where Robert N. Dangremond sees it, "there's really no problem that can't be fixed."

As a principal of Jay Alix & Associates, a New York-based consultant specializing in turnarounds, restructurings, and other services for bankrupt, troubled, or underperforming companies, he's called on to fix jams other executives can't or won't handle.

He has some advice for bankers trying to salvage credits to troubled companies: Dump the data on the table so everyone involved gets a chance to consider how bad the problems are.

Mr. Dangremond, who worked 13 years for Chase Manhattan Corp., claims special qualifications to negotiate financing for ailing companies. He has held corporate positions in sales and marketing and strategic planning and has been a treasurer, chief financial officer, president, chief executive officer, and director of several companies in different industries.

At Jay Alix, Mr. Dangremond has worked on turnarounds at the computer companies Wang Laboratories and Uniysis Corp. and at AM International, which makes printing and graphics equipment. He is now working on one as president and CEO of Forstmann & Co.

Forstmann, one of the country's largest manufacturers of woolen textiles, filed for Chapter 11 bankruptcy protection in September 1995. Mr. Dangremond was brought in shortly after that.

He moved quickly to scale back Forstmann's operations, reorganize management, reduce costs and inventory, and improve quarterly performance. He said he expects to bring the company out of bankruptcy this year.

To finance this recovery, in 1995 he helped secure an $85 million debtor-in-possession financing from General Electric Capital Corp. This week BankAmerica Business Credit Inc. will begin bank meetings for a $110 million secured, syndicated credit for Forstmann, signalling a return to normalcy for the company.

Mr. Dangremond said he's keenly aware of the pressures commercial bankers face. When dealing with a debtor's bankers, he said, "you're really managing their career."

In his eight years with Alix, he said, he has seen the banking industry improve its handling of troubled companies.

"My complaint in the past used to be that it was very difficult to get a lender to focus on a troubled situation, because it was troubled," Mr. Dangremond said.

"Now bankers have become very specialized. They have speciality groups; individuals that are experts at dealing with troubled inventory or troubled real estate, pollution problems, et cetera."

Because banks now have much more experience with troubled firms, they are able to respond quickly. "It may not be a commitment I like, but they can get to a commitment much faster."

But new difficulties have cropped up, especially those stemming from the development of the secondary and distressed loan and debt markets.

Traders, he said,"have a different interest in seeing the long-term survival of the company" and may be more interested in quick returns than a banker. "It makes the negotiation and the long-term restructuring much more difficult," he said.

For example, in one set of bankruptcy negotiations with bond holders, Mr. Dangremond was close to closure when they asked for a recess. "They left the room, sold their claims, and two hours later a whole new set of holders of these obligations showed up across the table-and I had to go back to square one."

Syndicated loans pose another set of challenges for a troubled borrower. Many banks simply take his business projections and instantly turn them into inflexible covenants that impair his ability to help the debtor.

"There could be a perfectly logical reason for the debtor to be outside of the covenants," he said. But because they were violated, "it might cost hundreds of thousands, or even millions of dollars to amend the covenant breach-even though it might not be jeopardizing the loan."

To avoid such covenants, Mr. Dangremond will develop a "minimal" business plan with goals that are 99% certain. "Then I prepare a management business plan that might be 60% achievable, and as an interim CEO, I would manage the business to the management plan, not to the bank plan."

When selecting banks to work with his clients, the top criteria are availability of funds, terms, rates, and up-front fees, which can be a significant burden on a cash-constrained company. But in recent negotiations for Forstmann, he said, he looked at a fifth item: "the individuals within the organizations' understanding of our business."

"Inevitably a company that's in trouble is going to violate some covenant, somewhere, someday," he said. When that happens, having bankers who know the industry "minimizes the amount of time I have to go out, in a crisis, and explain a problem."

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