Cities remember us better than we remember ourselves. In New York, I first learned that people can make a splendid living by orchestrating order from chaos. Retracing the steps from my first apartment on East 53rd to the office on East 52nd (it was a great commute, okay) always makes me nostalgic for the lives I could have lived.
Coming out of college, the first-year analyst pool wasn’t specialized, so we got to learn across product and industry groups. While M&A activity was robust that summer, an early assignment was picking up from an Associate who left in the middle of a multi-year restructuring deal. Ah yes, nothing more I’d ever dreamed of than merging two StrugCos into a SuperStrug entity. Of course, doing the job right could save thousands of other jobs; it could also entail playing therapist to management teams and their creditors as both sides process their losses. It’s people business, coordinating cooperation from an audience that doesn’t want to be there.
It takes a certain kind of personality to thrive.
That year, you could count the number of RX headlines on Wall Street with your hands: the economy was healthy, markets were on a rip, and businesses were growing. Had I graduated into a worse economy (or been more masochistic), I’d like to think I would’ve pursued a career in restructuring.
I’d be unduly flattering myself to say it’s because the work was more technical (it was), the process more grueling (multi-year cycles with delayed payoffs and resource-intensive debtor mandates), the teams more dynamic and global (multi-jurisdiction offshore holdcos, onshore claims, structural subordination across the stack), or played to my strengths (engineering process, running adversarial negotiations, managing to covenants and calendars, and being an overall forensic skeptic). But mostly, it’s because the head of RX struck me, among other things, as a magician.
What makes a magician?
A magician is the opposite of a rando: someone who got to where they are by getting lucky and striking gold. Surely, you might think, not that many successful people are complete randos. This may be true in traditional domains, where being business savvy and socially adept amounts to labor and capital leverage. But in software, where scale at near-zero marginal cost of replication can happen without ‘permissioned’ leverage, I’m not so sure. A rising tide lifts all boats, and growth hides all problems.
There are a lot of randos in tech. Often, they’re hiding in plain sight: employees at — quip that —— is the first person to become a billionaire without ever having made a decision. We’ve all worked with randos. There are no randos at the top of investment banking. Heads of M&A can sometimes slip in if they have oodles of charisma (which mysteriously evaporate when the client leaves), but RX is not a sales job. The head of RX was not a rando.
Restructuring is, by nature, a conflict business. At various banks, the group is sometimes called Special Situations, Distressed Debt, or Turnarounds. Unlike M&A (which felt predictable after a few rounds of slapping together a CIM, shaking the trees, and taking a deal through the process), the goal of RX is to minimize losses (“preserve enterprise value”), not maximize value. Outcomes are set by people who can see the battlefield, map its adversaries, and sequence a credible path out.
Few (no) companies actually want to be there. Usually, they’re forced by a creditor or lawyer, which is also how these groups generate deal flow. Then, once a company is there, they want to save face. This means: exchange offers, amend and extends, contingent value rights, backloaded coupons that get the economics without the headlines. It also means normalizing contested situations where every stakeholder has an incentive to posture or withhold information. Deals can drag on for years.
So, what kind of person thrives in RX?
A magician. The head of RX was a mathematician by training who rose up through the ranks in London and Hong Kong before joining the firm in New York. What he lacked in beaming outward charisma, he more than made up by being the most effective person in a crisis I’d ever met. He was equally at ease quelling discovery fights and designing credible threat paths (see: winding up petitions) as he was sitting across from a panicked CFO and angry creditors at the same table.
To us, he was exacting: paranoid about client privilege, leaks, and selective disclosure. He made all his junior bankers tie cash to bank flows, triple quadruple promise-on-their-year-end-bonus check asset lists against pledges, statutes, and local filings. (And the first model we received was always wrong; our job was to find out where before we had to be told.) I spent Thanksgiving that year poring over diligence lists, model packs, and consent tallies; I practically had Gantt charts stamped inside my eyelids. This was a small price to pay for the education I received in return.
The head of RX was the first person who taught me to see structured adversarialism as an opportunity to thread the needle, an optimization challenge:
Biggest offshore creditor wants X. Crossover fund wants Y. Distressed fund offers Z. ParentCo prefers ZZ for optics. Your client, StrugCo, has N weeks of cash. How do you: (1) secure a standstill, (2) file Cayman JPLs, (3) raise a bridge, (3) sign an RSA, (4) run the Cayman scheme with U.S. recognition, and (5) ensure votes clear with custody outreach?
(I’m rusty on mechanics now, but you get the picture: RX is the process of last resort.)
Management will want a miracle. Creditors will want to scalp. The magician’s move is identifying the class that will own the reorganized entity and shape the term sheet so they will sign the RSA while everyone else gets just enough option value to settle instead of sue. People think of the Cold War as a classic example of brinksmanship, but the O.G. negotiators worked 200 miles northeast, in New York not D.C.
Behind the scenes of a magician’s act, there is:
The misdirection: To management, never call it a bankruptcy. It’s an exchange, an amend-and-extend, a re-coupon with contingent value.
The forced reveal: Court calendars, consent thresholds, funding drop-dead dates will all seemingly arrive at once. Let the calendar adjudicate.
The invisible thread: Offshore schemes are fast and predictable; Chapter 15 in the U.S. can harden the peace. Pick a venue where your client gets leverage.
Mechanics of the deal: No one gets whole, so don’t chase 100%. Target the fulcrum, then do the consent math so all other classes get some option value.
Reality: No one comes into it happy; no one gets out of it happy. But if the company stays alive, and that company is your client, then that’s your metric.
Years later, I heard he retired and moved his family to Abu Dhabi.
In the annals of the interwebs, there was no press release, no DealBook announcement, no digital fanfare, no trace. He’d always operated as though he preferred the back row to the spotlight. I’d like to think his greatest trick was orchestrating a show that continued to run without him. No one came in wanting to be there, but everyone left with a story they could live with. Order restored, applause unnecessary. Once that was true, he did what magicians do when the trick is clean: he vanished, leaving the system to hold on its own.
New life. New coordinates. The thread ends where he wanted it: offstage.
