Restructuring is Paradise

I wake up before my alarm, drenched in sweat, wondering whether last night’s FINAL_LIQUIDITY_v35b_POSTCALL_REV2.xlsx shows the company technically breaching its liquidity covenant this week or next. My hand instinctively reaches for the phone. Three emails from Kirkland. Two from Weil. One from a hedge fund analyst who signs his email “Best, Chad, MBA, CFA, CAIA.” I don’t know Chad, but I already hate him.

I get to the office so early that the security guard asks if I’m leaving or arriving. I say arriving. He pauses, looks at me, and swipes me in anyway. I don’t turn on the lights. The glow from my 2 monitors is enough to perform surgery.

Morning:

The first task of the day is updating the debt waterfall model, not because anything changed, but because someone wants to see it “with a slightly different scenario”. I shuffle around the assumptions but the priority of payments still leaves the junior lenders high and dry. I briefly consider reversing the order just to see if anyone notices, but out of respect to my MD that plays golf with my dad, I just save the file as “WATERFALL_v32_Conservative_DONOTDISTRIBUTE”.

At 9:30 a.m. sharp, the “Cooperative Dialogue” call begins. There are 44 people on the line. Thirty one are lawyers. Two are advisors billing $1,200 an hour to say “let’s circle back”. One is a hedge fund guy who bought the debt at 30 cents and now refers to himself as a “long-term stakeholder”. The company’s CFO is there too, three weeks from being fired and already speaking in the past tense. The company under surgery: iRobot Corp.

Someone asks if equity is getting anything. There’s a pause. Someone says, “It depends”. I write “0%” in my notes. 

A distressed PM boomer that no one listens to keeps saying, “We need a bailout, this is a national strategic industry”, referring to the 0.035% revenue from selling Roombas to the Pentagon.

A lawyer from Gibson Dunn has been speaking for fourteen minutes and has not yet reached the verb in his first sentence. I take notes that just say “???” and “why”. Then I remember my MD might want to review them, so I translate them into something more professional: “potential priming risk, sponsor no-show (sixth meeting in a row), CFO exploring Dell-like sovereign or quasi-sovereign capital sources”. 

A hedge fund guy holding preferred shares interrupts: “What’s the catalyst here?” There's a brief silence. Finally my MD says “Same hour tomorrow?”. Everyone nods. The call ends.

Mid-Day:

Lunch is a sad Tupperware of plain chicken and broccoli, a direct attempt to lose weight after a mom on 53rd street told her kid “Eat your vegetables, or you’ll end up like that man (me)”.

I eat it at my desk while reading a 10-K for a company that hasn’t filed on time in three years. Deloitte has used the phrase “significant doubt” four times, which feels excessive until you remember they’re trying not to be sued. 

I close the 10-K and pull up Bloomberg. I type DDIS to check the company's debt. The screen loads. I scroll to the 2nd lien - “trading at 24% YTM”. I give a slow, knowing, professional nod. "Mhm," I mutter, in full and intellectual agreement with the market's assessment, congratulating myself that I, too, would price the paper at this YTM given the obvious operational headwinds. Then I realized I typed the wrong ticker. I close it and pull up the correct company. The YTM is 93%. I nod again, in full agreement with the market, and blame the initial error to my sleep deprivation despite my fitness tracker showing a 98% sleep score.

Suddenly Team pings. It’s the summer analyst. Two months ago, I delegated the task of updating the capital structure tables. The message reads: “Hey – quick q. For the cap table deck, should the unsecured bonds be listed above or below the vendor trade claims?”. 

I pause. Fingers hover. I could lecture on the doctrine of equitable subordination. I could send the 40-page Davis Polk white paper. I could explain the grand hierarchy of claims. I also know I’m leaving for Apollo next quarter. So I type a simple, clear, professional directive: “Put them wherever. They're all getting fucked”. 

His status flips to “typing”, and stays there for five minutes. His reply: “(thumbs up) Got it. Will do”.

I return to my screen. The 2nd lien’s YTM now reads 91%. Someone bought the dip.

Afternoon:

In the afternoon, I get tasked to update the “Restructuring Alternatives” slide. Option A: out-of-court exchange. Option B: pre-packaged Chapter 11. Option C: liquidation. Option D: a miracle. I delete Option D. My MD adds it back. 

I move to my next meaningful task which is building a recovery model for a hypothetical liquidation sale. I spend four hours modeling the auction value of machinery that was last operational during the Obama administration. A VP pings me: “Can you run a scenario where the business plan actually works?” I do. Equity gets 5%. I send it with a note explaining it assumes a flawless operational turnaround, strong market growth, and a surprise tax reform by the administration by the end of the week. He replies, “Interesting. Let’s park it for now”.

Emails pile up from the Ad Hoc Committee of Something-Something Noteholders. Their sole substantive point is that the company’s use of the term "autonomous navigation" in its business plan is materially misleading, as the automatic vacuum cleaners primarily achieve mobility through "persistent, semi-directional bumping."  Their signature block is longer than their legal argument. 

Evening:

By 8 p.m., we’re preparing for the War Council - a meeting with our lawyers to plan how to screw the other creditors before they screw us. The partner lays out the strategy calmly: file a motion to reclassify their claim from “secured 1st lien” to “general unsecured”. It’s a long shot, but it will keep them busy. It will also cost $500k in legal fees, which is described as “worth it”, though no one says for whom. 

At some point, I check my inbox before taking my daily 30-minutes WC break. There’s an email from the debtor’s CFO titled “URGENT: Adjusted EBITDA Definition - DOUBT.” He’s proposing to add “employee morale erosion” as an add-back. I stare at the screen for a long time and briefly consider quitting finance to open a bar that only serves people in restructurings. I shrug it off remembering my student loans and forward the email to my MD. Minutes later a reply: FW:RE:RE:FW:RE: URGENT: Adjusted EBITDA Definition - DOUBT saying “coordinate meeting with CFO and call Deloitte to discuss, thx”.

By late night, the office is a ghost town. It’s just me, the night janitor, and a VP who just sent a comment on a document we finished yesterday: “Can we make the ‘zero recovery’ conclusion sound more constructive?”. I spend 45 minutes rewriting “equity is wiped out” into “the existing capital structure provides a suboptimal alignment of incentives for current equity holders.” I allow myself a smirk wondering whether I should go for a JD, deeply aware that I failed the LSAT twice.

The MD pings me: “Can we model a scenario where interest rates go negative and the company’s primary product becomes accidentally fashionable on TikTok?” I assume viral fame, zero borrowing costs, and a government subsidy for failure. Equity recovery ticks up to 1.2%. I send it with the note: “Defensible under a 7-sigma event”. He replies, “Interesting. Let’s pencil it in”.

At 10:46 p.m., I send the evening update. Subject: “Updated Recovery Sensitivity Analysis - Preliminary Views for Consideration”. I attach a 110-page deck. The last page is a single, powerful number: 0.0%. I write, “Please review at your convenience”.

At 11:52 p.m., I send another update and apologize for the timing. I say I’m happy to discuss. No one responds. 

I stare out at the distant city lights and have a cinematic moment. Somewhere, in a perfectly lit factory in the Midwest, honest, hardworking employees are probably going about their lives, blissfully unaware that their entire futures hinge on the “Assumed Recovery Scenario 3” tab I've built. I then turn my head gazing my bookshelf. It holds a strange taxonomy of my life. Dale Carnegie’s How to Win Friends sits beside The Art of Seduction, a buffer zone of failed normalcy that led nowhere. But at the center, the sacred texts: the creased, spine-broken copy of The Caesars Palace Coup and, looming beside it, the Credit Investor’s Handbook. They remind me of the nights I’d stare at LinkedIn, imagining the post: “Thrilled to announce I will be joining the Restructuring Group of Goldman Stanley and...”. 

Suddenly, my phone lights up interrupting the moment. It's my VP: “Quick thought, can we pressure-test Scenario 7 by assuming the 2nd lien lender forecloses and triggers a disorderly 363 sale?”. 

I type “Will Do!” and pull WATERFALL_v32_Conservative_DONOTDISTRIBUTE to create a new version named WATERFALL_v33_Conservative_DONOTDISTRIBUTE.

I finish it and lie in bed, the blue light of my phone casting a sickly pallor across the ceiling. The silence is absolute. I turn the thought over and over, a mantra held against the dread, that this, right here, is what I prayed for. That this, right here, is the way. It occurs to me that I would not have it any other way. 

Across the room, the Roomba strikes the wall, recoils with a soft, indifferent thud, and resumes its endless, programmed, futile patrol. Eyes heavy, I murmur, to no one and to everyone, as I gently fall asleep:

Restructuring is Paradise.