PIONEER SPIRIT: David Nemecek started at a firm that rotates young lawyers through different practice areas, "My first rotation was in banking and finance, then I did an M&A and capital markets rotation. In 2005 I wanted to move back to Los Angeles, and every firm I talked to said I should be a banking lawyer. It was a time of increasing specialization in finance, and firms needed to build depth in that area. I was in the right place at the right time.
TRAILS BLAZED: Nemecek specialized in representing borrowers and creditors in complex liability management transactions. "We analyze their debt document to determine what the leverage points are and how we can utilize flexibility in creative ways. Typically, the goal is the avoid a formal restructuring, if possible, and reach a consensual agreement with stakeholders. We use the flexibility inside the debt documents to create the conditions that allow for reaching consensus." For example, he represented Neiman Marcus in a series of transactions that moved assets away from creditors and ultimately returned many of them in exchange for maturity extensions. He also represented PetSmart in a transaction that unlocked equity value in the company's Chewy online retailer. "We did something that was quite unique. Among other things, PetSmart distributed about 20 percent of Chewy to a holding company which caused Chewy's guarantees of PetSmart's debt to terminate. That incentivized PetSmart's lenders to negotiate a long-term reset of the facility."
FUTURE EXPLORATIONS: When capital markets are strong and debt documents are flexible, it is likely that companies will continue to explore liability management transactions, rather than in-court restructurings, in hopes of growing into their capital structures and maintaining upside for all stakeholders. "I expect we'll see not just private equity-owned companies consummating these transactions, but also public companies."