đNotice of Appearance - William Snyderđ
CR3 Partners' Senior Managing Director schools us with decades'-worth of experience.
This week we welcome an appearance by William Snyder, Senior Managing Director at restructuring and turnaround advisory shop CR3 Partners. With over 40 years of experience, William has seen, done, and been through a lot; heâs repped clients in myriad industries ranging from oil & gas to manufacturing to retail and restaurants; his breadth of work earned him an induction into The Turnaround Management Associationâs 2023 Hall of Fame class which gave us this beaut of a video where William says â[w]ell I got into this by a total accident, okay, I mean, no one plans to be a turnaround person,â LOL. Weâll unpack that and more đ. Letâs dig in.
PETITION: William, thank you for doing this, weâre very happy to have you and very sorry weâre anonymous because, hot damn!, this âappearanceâ would be far better on video, if weâre being honest.
Anyway, letâs begin with that đvideo because ⌠man ⌠thatâs ⌠uh ⌠quite the origin story, lol. You turned around your then-father-in-lawâs business as a wee youngân and then got into the M&A business and bought nine companies and five of them failed!? You describe that record as a âpersonal tragedy.â Tell us in more detail what happened with that portfolio, how you had to take over 50% of it through bankruptcy, and how that paved your career path from there? Also, đł, what did you do on the personal front to maintain your sanity during that period? Is it right that, per the article noted below, you lost your ââŚsprawling trophy home, turboprop plane, Ferrari, and wife, all seemingly in one fell swoop?â Hot damn! Feel free to pretend weâre your therapist (and take as many words as you need, lol)!!
William: 1989 was a bad year for me. I lost my companies, my wife and my home, and had to move to Dallas to start all over again. I remember celebrating my thirtieth birthday in a house I was renting for $500 a month with my two daughters, who were five and six years old at the time. At that moment, that was all I had. Then I remembered the time I was sailing with my ex-wifeâs grandfather who was dying from cancer, when he told me that âall you need in life is your health and your dignity.â When you hear that advice at 24, that does not make much sense. But later that week, sitting alone in that house, I realized that I had what I needed to come back, and that I was not sure how to do it, but I would do it; and that there is a higher power in the universe that endows you with the gift of self-determination.
I had several good friends and family who were there along the way to encourage me, get me to stop crying about the past and look forward. I found young, hungry attorneys who worked on a contingency basis and sued the primary seller of the company that really collapsed everything and won back $13mm, and although all of that was in trust for my children, it was still a win for me. At the time, I read about the restructuring firm Buccino and Associates, applied for a job there and they hired me for $32k a year. By the second year, I was making $89k and clawing my way back. I met my new wife along the way and added four more children to my family, so I was set with a new career, expanded family, and colleagues who would become my business partners several times over.
Turnarounds suit me: they are high-octane, ever-changing and perfect for folks with adult ADHD. My new circle of professional friends grew, and these colleagues would become the foundation of my next few firms.
PETITION: In the same video you reference this absolute gem of an article about you: âWhy People Love to Hate Bankruptcy Guru William Snyder.â We donât know a lick about the author Barry Shlachter but, egads, homeboy can string together some evocative prose:
âNo clairvoyance was required to predict that testosterone would erupt inside the Fort Worth federal courtroom. After all, aggressive East Coast lawyers for bottom-feeding investment funds were jabbing and gouging at equally pugnacious attorneys for Texas Rangers owner Tom Hicks and Major League Baseball Commissioner Bud Selig over the Rangersâ bankruptcy sale.
At heated moments, pinstriped attorneys swore like foul-mouthed longshoremen. Creditors battled for every penny that could be squeezed from ego-fueled millionaires seeking control of the insolvent, but talent-rich American League ball club. During the teamâs auction, two attorneys went toe to toe in a courthouse corridor, exchanging F-bombs in front of wide-eyed teenagers and other spectators.
Yet many parties to the dramatic and prolonged transaction could agree on one thing, at least: the full-bore loathing they had for one William K. Snyder.â
The entry about the Texas Rangers bankruptcy reads to us like you just doing your damn job: maximizing value for the estate (by boosting the sale price by ~$100mm and juicing creditor recoveries). But clearly that pissed off MLB Hall of Famer Nolan Ryan. Tell us about that Rangers restructuring, some of the dynamics, the players involved (Mr. Ryan, Chuck Greenberg, Mark Cuban), and any lessons learned. We reckon youâve got some good stories about this one. Did it ever come close to this đ?
William: I have counseled restructuring newbies to be friendly but never familiar with your clients; once you go native, you can no longer be objective. Being a CRO is not a popularity contest. You have to make decisions that should have been made by the management team over the last 20 years, and although people may not like you, they will come to respect you.
As for the Texas Rangers, the fans wanted Nolan Ryan to get the team, as did MLB. I told the judge that we should get either a fair price or a fair process. The first thing I did was ask the City of Arlington why Tom Hicks got the parking lots in the 2006 transaction; they said Hicks only got drop-down rights and the person who got the stadium got use of the lots. Realizing that over $70mm was not going to creditors because of that arrangement, I canceled the sale to Nolan Ryanâs group and ordered a new process that did not compensate Tom Hicks for the parking lots or the airplane, which would allow over $100mm to flow to the creditors.
I called Mark Cuban and Jim Crane (who later bought the Houston Astros) back in and restarted the auction. At that moment, the fans exploded on me, the judge and I received death threats, the FBI got involved and U.S. Marshals began attending the proceedings. Nolan Ryanâs group ultimately won the auction and the creditors received over $100mm more than they had expected. So although Nolan Ryan and his crew still do not like me, the other constituents respected me and the work our team did on their behalf.
PETITION: Wow. Well, okay then. Moving on ⌠you cite Pilgrimâs Pride as a genuine source of ⌠well ⌠pride. The company was the largest integrated chicken producer in North America with 25% market share and over 45k employees; it had $2.5b of debt and lost hundreds of millions. You got retained as its CRO and helped usher it through a chapter 11 process. Tell us how you orchestrated this turnaround. If you had to choose, is this assignment the one that youâre most proud of? Why (or why not)?
William: The other advisors in Pilgrimâs Pride all focused on the financial results that showed the kill plants made money and the processing plants lost money. Well, the kill plants transferred meat at cost-plus, so of course they never lost money; and the processing plants ate the difference between the market price and the transfer price. Along with management, we decided to close several plants, quit selling chicken below cost and only sell chicken that had an eventual customer. This downsizing enabled $500mm of expenses to come out of the company and EBITDA swung from negative $350mm to positive $640mm in one year. It was a fabulous turnaround.
This was a huge case where the equity got over $400mm and all the claims were paid in full. It involved very hard decisions that nobody wanted to make until we got there, and getting the alignment of the management team, the board of directors, and the creditors was a monumental task. I am very proud of our teamâs work on this assignment, not just because of how the constituents benefited, but because Pilgrimâs Pride is still thriving today and the decisions we made in that case laid the groundwork for years of success. It was a great result all around.
PETITION: Letâs take a moment to admire Pilgrims Prideâs stock chart (ticker: $PPC):
PETITION: Before we move on to something more recent, feel free to tell us about another one of your older assignments and why you think the lessons learned are relevant in todayâs business and restructuring environment.
William: Some of my favorite cases were middle-market cases that involved outside-the-box thinking that saved the company. The middle market is a place where a small team can make a meaningful impact in a short period of time, which is why most of my career has been with middle-market companies.
One company was a candle manufacturer that supplied big-box retailers. They changed their production process and blew an entire holiday season when they would typically earn 60% of their profit. I was appointed as CRO after they turned in their December borrowing base in March and found they were overadvanced by $15mm on a $35mm facility. We found a way to fix the production and the orders were strong â this was a viable company. It is important to fix the left side of the balance sheet before you attack the right side to ensure you are maximizing value. The bank agreed to provide a seasonal overadvance if we could convert 80% of the past-due payables into notes. So we accomplished the creditor composition, drew the advance and shipped all the seasonal products. After the season, the company was sold and all the creditors were paid, and even equity had a recovery. This was a small case, but it involved so many moving parts that had to come together.
PETITION: Last year you were the CRO for BUCA Texas Restaurants LP which, along with nine affiliates, filed chapter 11 bankruptcy cases in the suddenly popular Northern District of Texas. We wrote about the initial filing â in Shlachter-esque manner â here. It was â âĄď¸shockerâĄď¸â a sale case where the debtorsâ senior secured lender, Main Street Capital Corp. ($MAIN), ultimately credit bid its debt and took this baby and its âunique dining experience and communal approach to mealsâ for itself. We cheekily bemoaned the result at the time:
âWe expected a vigorous auction for the assets of Buca Texas Restaurants LP** because, like, âgenerous portions and vibrant atmosphere,â who wouldnât want that?! And a reliable supply of the Meatball Sandwich? Nope. The debtors dropped this notice of cancellation on October 4, which also designated pre-petition lender and stalking horse Main Street Capital Corp as successful bidder. All it took to bring that âunique dining experienceâ home forever was a $27mm credit bid, cure costs and assumed liabilities.
Why doesnât anyone want to participate in these bankruptcy auctions, damn it? Not even just for the hell of it? Câmon now, distressed buyers, auctions are one of the most ancient forms of price discovery!
Weâve had a sweet spot for auctions since ⌠well, thatâs basically all we write about in bankruptcy these days âŚ.â
Structurally, though, there was much more to it behind the scenes. Tell us about (i) the corporate entanglements, (ii) the likening of Main Streetâs moves to Red Lobster, and (iii) the lifting you had to do to get this company sold in bankruptcy.
William: Buca had to be clawed out of the parent and we had to develop an entire corporate infrastructure in 60 days. It was a heavy lift: POS, accounting, payroll, advertising, digital services â everything had to be stood up in two months. Buyers were wary of the process and many stayed away due to the execution risk, but we did it and it is operating today, and I am confident Main Street Capital Corp. ($MAIN) will eventually sell it to one of the purchasers who would have otherwise shown up to the auction.
On the issue of credit bids, due to the rise of private credit we are seeing many more instances of lenders buying the debtors in an auction. Regulated banks tend to avoid these situations, and many auctions do not gain momentum because nobody wants to bid against a bank with unlimited dry powder. This can be remedied by the bank limiting its bid, as was done in the Buca sale.
PETITION: While weâre on the topic of restaurants, your firm is also involved in the Pinstripes Holdings Inc. chapter 11 bankruptcy (which we also covered pre-filing here). While we recognize this may not be your deal, what can you â perhaps with the help of your colleagues â share with us about this one? This seems like a pretty straight-forward case but weâre wondering if, like BUCA, there was more here than meets the eyeâŚ?
William: This is a live case so I cannot say much, but I spoke to my Partner James Katchadurian, who is the Chief Restructuring Officer on the case, and he said, âThe sale just closed and we are cleaning up what remains. In the end, seven stores were sold to Punchbowl Social, which saved both jobs and the brand.â
PETITION: Zooming out, weâre not wrong about everything in bankruptcy basically being a quick sale these days (or are we?). First Brands notwithstanding, large messy free falls are a rare bird with LME being the path of first resort. But your shop tends to play more in the lower-to-middle market where creditor-on-creditor violence is less of a factor: whatâs your take on whatâs happening in that slice of universe? Are you seeing a lot more âchapter 11 alternativesâ in play, e.g., foreclosures, article 9 sales, ABCs, etc.? What role has private credit been playing?
William: Private credit has issued about 80% of the loans to middle-market PE firms in the last five years, compared to 15% in the five years before the 2008 recession. Bankruptcy costs have also soared in the past five years; we used to do a âcheapâ chapter 11 for $3mm to $5mm, and now that same case would cost between $6mm and $10mm.
Private-credit firms are looking at alternatives such as Article 9 sales, receiverships and ABCs, and they will take the keys. Although most private credit firms are not loan-to-own shops, they will not agree to take a massive hit only for another buyer to reap the rewards. I have been involved in several private credit deals in the last few years where we did an assessment of the company and met with the equity, term lender and revolver lender in NYC, and the entire capital structure was overhauled in a three-hour meeting. If we were dealing with a money-center bank, CR3 would be CRO, we would hire an investment banker and $10mm later a 363 sale would be completed. If you do not possess the skills to do operational improvements, there is no role for an FA in the private-credit world. Our industry has priced middle-market bankruptcies out of the market, and firms that can drive performance improvement and operational changes at borrowers of private-credit shops will thrive.
PETITION: Weâre now in Q425. What are your contacts telling you about the current state of the economy (with devaluation of the dollar, higher tariffs, lower end consumer confidence deterioration, etc.)? Any canaries in the coal mine? What do you anticipate for the final stretch and what are some trends youâre keeping an eye on as we head into â26? Is there any sort of visibility? What industries are most at risk? Play macroeconomist if you feel like it.
William: When DJT became president in January, the whole industry hit the pause button, lenders were hesitant to move on borrowers and the world waited to see if this guy would do what he promised. Well, he did, the floodgates opened and we have been very busy since the late summer. Agriculture is gutted: soy, wheat and corn are 180-day row crops that were planted before tariffs took effect. Now the crops have just been harvested and the farmers lost one-third of their business as China switched to Brazil and other countries for its supply. Tariffs are slamming importers: when your margin to big-box retailers is 20% and the tariff is 20%, you are sort of screwed until the next season when you can get a price increase.
The canary in the coal mine is casual dining: it always takes the first hit, and with the filing of Red Lobster, TGIF and Buca along with others, it shows that the consumer cannot afford a meal at $20 per person all-in. Right now, transportation, commercial real estate, some residential, agriculture, casual dining and importers are in trouble. Inflation bumped back up and long-term rates are not dropping. You also see cracks in private credit as many of the loans from 2021 and 2022 are coming due and there is no place for them to go. I believe there is a black-swan event coming that will involve a confluence of regulated entities funding non-regulated private credit, higher long-term interest rates and a general decline in consumer confidence.
PETITION: To add our two cents here, a look at the recent earnings reports for CAVA Group Inc. ($CAVA)(stock down 22% in the past month), Chipotle Mexican Grill Inc. ($CMG)(stock down 27% in the past month), and Sweetgreen Inc. ($SG)(stock down a whopping 30% in the past month), shows youâre definitely on to something.
PETITION: AI. Are you seeing it be a factor with the companies youâre advising?
William: Artificial intelligence has not been a major factor for our clients thus far; genuine ignorance is a far bigger issue. But on our side, we are developing AI-enabled case-management tools to help train and manage our workflow. I expect AI to play a bigger role in harnessing the decades of tribal knowledge and on-the-job training that is typical of our industry and converting it to institutional knowledge that is accessible to even our youngest professionals.
PETITION: What would be your selection for the most impactful restructuring matter of â25 thus far and why (donât shamelessly list your own work)? Feel free to acknowledge a matter that filed for chapter 11 or one that restructured out-of-court.
William: I will sort-of answer the question by saying that, rather than one specific matter, I believe the rise of private credit and increase in out-of-court workouts are the most impactful trends in our business at this time. For the last three years, less than 20% of our business has been in Chapter 11, and the ability to fix companies and take them through out-of-court processes has become increasingly important for our industry.
PETITION: What is your favorite thing about the bankruptcy code? On the flip side, you must have some thoughts about inefficiencies in bankruptcy. What is f*cked and needs fixing? Is there one subject that not enough people are talking about? If you could implore Congress to take action about one thing, what would it be?
William: I have a long list of inefficiencies in the bankruptcy code. I personally think BAPCPA was a disaster for the restructuring community. Being able to file an administratively insolvent company was not possible prior to 2005. This has especially harmed retailers and distributors, where a major part of their inventory is in 503(b)(9) claims. Retailers now are likely to go straight to liquidation because you cannot pay the administrative expenses to come out. Costs have also skyrocketed, as I mentioned earlier.
On the positive side, BAPCPA is really the only way to novate a large amount of executory contracts and convey assets free and clear of liens. Out-of-court options such as receiverships and ABC do not really allow straight novation or conveyance. If I could change something, I would rescind BAPCPA and change the debt limit for subchapter V to $20 million.
PETITION: What are some of the biggest changes youâve witnessed happen to the business of bankruptcy over the course of your career?
William: Technology has been a major factor in restructuring. When I got into this business, the laptop was not even fully developed, and MS Excel and Word did not exist. Today, my younger colleagues are using Tableau and other tools for data mining instead of Excel. Technology has allowed us to simulate changes before we act and make better decisions.
The rise of the RSA: Virtually all large cases have an RSA and therefore the outcome is usually predetermined. This has allowed a select group of capital sources and associated professionals to dominate the larger cases. The middle market is the last bastion of turnarounds that include an operational fix along with a balance-sheet restructuring.
Finally, the industry is rapidly consolidating to a multi-strategy go-to-market offering. The CRO is the tip of the spear and can identify and create opportunities for corporate finance, operational improvement, litigation support, office of the CFO and valuation. If you carry this consolidation forward, I predict there will be no standalone turnaround firms in two years.
PETITION: What is the best piece of professional advice that youâve ever gotten and why? Please lay some wisdom down on our readers who may be at the initial stage of their careers.
William: This is both a life lesson and professional advice: âPick your partners wisely.â You spend more time with your work family than you do with your biological family. I did not grow professionally at an acceptable rate until I had the right partners around me. Partners should amplify your strengths and offset your weaknesses, and until you find pillars of trust and respect in your partnership, it will be built on straw. This is also true with every other relationship in your life.
PETITION: Finally, youâve likely noticed that we like to snark âLong ABCâ or âShort XYZ.â What are you âlongâ these days? What are you âshortâ? Feel free to be creative here but please list one thing thatâs legal/financial and one thing thatâs ⌠well ⌠whatever.
William: Long: Patience; long-term bond market remaining weak and driving a rush to short-term money; private-credit growth leading to a downturn.
Short: Time to play with my grandkids; the Dallas Cowboys; Texas A&M staying undefeated (gig âem!).
PETITION: Thanks William. We really appreciate you doing this. đ
đResourcesđ
We have compiled a list of a$$-kicking resources on the topics of restructuring, tech, finance, investing, and disruption. đĽYou can find the list heređĽ. We recently added Andrew Ross Sorkinâs newest title, â1929: Inside the Greatest Crash in Wall Street History and How It Shattered a Nation,â and âIf Anyone Builds it, Everyone Dies: Why Superhuman AI Would Kill Us Allâ by Eliezer Yudkowsky and Nate Soares. Both are available now.
đ¤ Noticeđ¤
Bryan Gaston (Senior Managing Director) joined Teneo from Ankura Consulting Group LLC.
Zach Contreras (Senior Director) joined Portage Point Partners from Accordion Partners.
đžCongratulations toâŚđž
Ducera Partners LLC (Mike Genereux) for securing the investment banker mandate on behalf of the official committee of unsecured creditors in the First Brands Group, LLC chapter 11 bankruptcy cases.
Pachulski Stang Ziehl & Jones LLP (Brad Sandler, Robert Feinstein, Michael Warner, Maxim Litvak, Theodore Heckel) for securing the legal mandate on behalf of the official committee of unsecured creditors in the Groff Tractor Mid Atlantic, LLC chapter 11 bankruptcy cases.
Vartabedian Hester & Haynes LLP (Jeff Prostok, Suzanne Rosen, Mary Taylor Stanberry, Martin Sosland, Candice Carson) for securing the legal mandate on behalf of the official committee of unsecured creditors in the PrimaLend Capital Partners, LP chapter 11 bankruptcy cases.