Ask Masonite lead restructuring counsel Jon Henes what made the case such a success, and he'll tell you that it was a strong board, a great management team, and advisors who worked like crazy to drive the best possible resolution.
And what a resolution it was — Masonite entered Chapter 11 with $2.2 billion in debt and came out with no debt and $150 million in cash. One hundred percent of the company's senior secured lenders and 99.99 percent of its bondholders voted to approve the plan (see related story, page 6).
Masonite's management team and board not only understood the right thing to do for their business, they also understood that they needed to trust in their restructuring counsel to get them there.
Unfortunately, that's not always the case. There are times when well-meaning management teams want to hammer square pegs into round holes despite their professionals' advice to the contrary.
"It is the job of the restructuring advisors to educate the CEO on the process and gain their trust that we know what we are doing and can help the company emerge from the restructuring process stronger than when it began. This, sometimes, is much easier said than done because it requires CEOs to go against their instincts in a process that is foreign to them," said Henes.
Masonite CEO Fred Lynch went into the restructuring process with a keen recognition that they had a once in a lifetime opportunity to fix the balance sheet. They were set on doing it once and doing it right, no matter how many difficult decisions they had to make, no matter how long it took to convince their lenders, and no matter how thin their patience wore. As a result of that philosophy, the team rejected early offers that today would have forced Masonite back to the negotiating table.
Such logic doesn't always come naturally for company leaders for whom optimism is a critical personality trait. That optimism can lead management teams to believe that a quick fix will tide them over until the market improves. At Masonite, however, "it wasn't that the management team wasn't optimistic, it was that they were so optimistic and confident in their leadership skills that they could see that if they made the painful decisions and restructured the business to sustain the worst, in the long-term, the company would grow, employees would be proud, and stakeholders would make the kind of money they want to make."
Source: Bankruptcy Court Decisions. Copyright 2009 by LRP Publications, P.O. Box 24668, West Palm Beach, FL 33416-4668. All rights reserved. For more information on this or other products published by LRP Publications, please call 1-800-341-7874 or visit our website at: www.shoplrp.com