Distressed Asset Investing and Corporate Restructuring

I took the Distressed Asset Investing and Corporate Restructuring program as part of my Advanced Finance Program.

The disruptions and market dislocations caused by the COVID-19 pandemic highlighted the importance of being able to read early signs of distress and execute on these opportunities with conviction.

The course is a highly engaging, interactive, and practical learning journey. It provided me with deep insight into the perspectives and incentives of the diverse stakeholders during the bankruptcy and turnaround process. We learned how to differentiate between value-adding and value-destroying activities, which is crucial for leaders to identify at the best of times but even more so in times of distress.

There were many opportunities to put the newly acquired skills into practice by working through the restructuring and negotiation process of real-life business cases. One of the highlights was gaining access to the leaders who performed the actual turnarounds in those companies. Having the opportunity to compare notes and learn from their experience was invaluable.

While skeptical at first, I benefited from the virtual-life nature of the program, particularly when working through the more complex, Excel-heavy parts that required undistracted focus. The networking did not come up short. We had many opportunities to get to know our fellow participants and professors during the “fireside” chats and other events that the fantastic faculty members organized for us.

Regardless of whether you want to learn more about distressed asset investing from an investor or company leader’s perspective, this program will prepare you with the right mindset and action plan to make the best decisions in times of high uncertainty."

Marc Nauer Executive Director , Smarter Communities Ltd.

Contrary to what many think, a corporate near-death experience (meaning a company is approaching or in bankruptcy) does not necessarily mean it is the end and all is about to be lost.

I believe it is from “non-normal” situations we can learn the most about what is important. How can we survive or avoid a liquidity crisis or insolvency by pulling off a turnaround as a company, or how can we profit from distress as an investor? What truly drives value creation, and why is growth not always a positive?

Through case studies, number crunching, memorable storytelling, lively discussions, collegial experience sharing, intense deal negotiations, and reading, Distressed Asset Investing and Corporate Restructuring provides a framework for thinking about investing and businesses that is actionable. After completing this program, you should be able to answer interesting questions, such as: What is distressed investing and how does it differ from other types of investing? Why does the company find itself in distress; are the root causes exogenous or indigenous? What is the value (not price) of a distressed business and why does that “number” matter so much? How can you source distressed investment opportunities? Who are the players; what are their incentives and goals?

Professor Kaiser and distinguished guest lecturers bring interesting and timely content to life in a fun, illuminating, and engaging manner. You will also meet a diverse group of interesting and inspiring classmates from across the globe you otherwise might not have crossed paths with.

I would recommend the Distressed Asset Investing and Corporate Restructuring program to anyone interested in gaining many new and even counterintuitive insights on a broad spectrum of topics. If you find yourself on the road to distress: know how you can live to see another day, and even create value, beyond the scope of special situations."

Erik Anerud Analyst, BE Bio Energy Group

Due to the global pandemic situation, a lot of good assets will go into distress and unfortunately, corporate bankruptcies will soar. As an investor, there will be opportunities to acquire distressed assets, but one needs to be very careful in picking the right ones. I was looking for a course that could provide me with the basic framework for analyzing distressed assets and turning them around for high returns. So, I enrolled in Distressed Asset Investing and Corporate Restructuring.

In the course I learned a lot about why companies get into financial distress and how to spot distress by looking at their financial statements. I also learned how to apply game theory to negotiating business deals to create win-win scenarios. I also discovered more about how to use spreadsheets for financial modeling and debt restructuring.

The class also changed my perceptions about Chapter 11. Previously, I assumed it was a completely negative situation, but I came to realize that it’s not necessarily bad for a struggling company to go under Chapter 11 as it provides the company an opportunity and required framework to come out of distress through debt restructuring and change in management structure. In addition, I learned that growth is not equal to value creation; sometimes, too much growth can risk the future of the company. Before taking this course, I was always thinking about growth first. Now I think about overall profitability and cost of growth.

The live online format of the course was very effective. I live in San Diego, CA, so I took the class in the morning, then did my regular day job, and finished homework afterward, so it worked out perfectly for me. Plus, Professor Kevin Kaiser could participate virtually in small breakout sessions to look into how we were solving a business case. I don’t think that is actually even possible in an in-person class.

I would absolutely recommend the course. To anybody who wants to learn more about turn-around, corporate debt restructuring, and value creation for investors — this is the course for you."

Sumit Tomar President and CEO, pSemi Corp., San Diego, CA

I attended Distressed Asset Investing and Corporate Restructuring to gain a better understanding of what drivers are used to measure a company’s viability and how a restructure may help to restore those components. Every day was unique and interesting, covering new material. In addition to all the material presented, I really enjoyed the depth of knowledge displayed by Professor Kaiser and the multiple real-life examples that put the material in context.

The insights gained from this course have both confirmed and broadened my perspective on value creation and its measurements. This course has also helped me look internally and focus on those value creation drivers to enhance corporate value. One thing that stood out was regarding valuation models — all of them are incorrect because they rely on assumptions, and assumptions don’t change the actual value of your company. That started some other interesting discussions. You can incentivize managers on revenue or profit, but that should be a result, not the goal, of properly structured incentives. When the right incentives are put in place, they lead to profit and value creation. When profits are the sole goal, you can destroy corporate value and cause real damage to cash flows since capex items are not reflected on the P&L. Those kinds of insights were very thought-provoking.

I had no experience with online learning, so I envisioned a webinar. I didn’t expect it to be so interactive. The professor kept us engaged, relating everything to real examples from his experience and to companies currently in the news. We took two short breaks every day and everyone was eager to get back to the virtual classroom. Requesting that cameras be turned on at all times and having break-out rooms for group discussions helped to bridge the virtual gap.

On the last day we worked in groups of three or four on a negotiation project. We talked about our strategy, and then combined with another group to negotiate. Then we went back to the entire group. In a virtual setting, that peer-to-peer interaction was very beneficial, and more of a personal touch than I expected.

I would recommend this course to others [em dash]not only to investors and attorneys, but also to executive management interested in developing a better understanding of value creation and sustainability. I am looking forward to taking Wharton’s The CFO: Becoming a Strategic Partner program next.”

Rocky Schweser Chief Financial Officer, Tactical Air Support Inc.

The book The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb (2007) described how an unexpected event can wipe out all our plans and preparations, and this is precisely what happened in March 2020.

Today’s stressed economic environment has put organizations in an unprecedented and highly complex situation where priorities have completely changed. Wharton's Distressed Asset Investing program provides a week-long intensive bootcamp to help brave the storm, understand the fundamental and practical applications of corporate restructuring and distressed asset investing.

I have recently transitioned from practicing M&A Advisory toward Corporate Restructuring, in light of the current macroeconomic situation. The program’s focus on collaboration among the cohort through case study sessions, practical frameworks for assessing opportunity within distressed assets, and use of real-world examples provided a holistic overview and brought me up to speed with many of my restructuring colleagues.

We benefited greatly from the roundtable discussions following each topic, as many members of the cohort would relate prior experiences or offer their own perspective. The case study sessions allowed us to engage in thought-led discussions with peers (including management, investors and practitioners) leveraging prior experiences to help propose a solution following bilateral negotiations which is finally presented to the wider cohort. The ability to analyze and predict how a number of parties interpret the same situation is a highly important skill within a corporate restructuring process which will likely see a number of stakeholders such as an ad-hoc committee of bondholders, lending banks and management voice their opinions regarding a potential transaction and a bespoke solution must be tailored to the interests of all.

Since completing the program, I have made it my goal to revisit the class material every 2 weeks to reflect on how I can better implement my learnings into my work. The course helped me frame commercial discussions, and deliver value-added and differentiated advice to our clients.

The timing of this course couldn’t better and is a definite recommend for senior managers within organizations indicating signs of stress, private capital investors looking to transition towards seeking value in workout situations, and practitioners looking to gain an understanding of the restructuring process.

Howard Marks, founder of Oaktree Capital Management (a leading distressed investor), famously said in 2019, “What return should you expect from distressed debt investing when the world is not distressed?" In 2020, the answer is much more than it was in 2019, and this course might help you capitalize on the opportunity and get there too."

Jishnu Suriyakumaran Associate, PJT Partners, London, UK