Thursday, May 10, 2007

When Restructuring and Distress can be fun

Maybe it's the British Week that unfolds superbly, maybe it's meeting up Fonty people again that stayed here in P3 then went to Wharton in P4, but I'm in a much better mood.

Part of this feelgood factor comes from Jake Cohen's class. As you know by now, I like Jake a lot. He reconciled me with Accounting and Financial analysis. He's so insightful and clear. Like today, the class was about the new role of CFO post Sarbanes-Oxley Act (the Enron Worldcom act putting personal liability on CFOs). With anybody else I would have died of boredom. With Jake it becomes interesting. That must be his American confidence, and a certain humility to go down to the level of participants.

Lots of this feelgood factor comes from Kevin Kaiser's class on Creating Value in Corporate Restructuring. As you can imagine, Corporate Restructuring and Financial Distress CRFD has one big enemy: Management. Kevin spent the first 2 sessions defining the economic ecosystem in big countries: Entrepreneurs (have ideas no money), Investors (have money no ideas), Banks (don't lend money anymore but retail packages), Capital Markets (inhuman bunch), and Managers (lack cash lack ideas, aka the Scumbags). Of course it's provocative, but very different. Kevin stressed his point by giving the example of RJR Nabisco, for which Management was ready to buyout double the share value, acknowledging outrageous agency costs.

Among the funny quotes:

"I have a friend, he's Romanian. But he's really cool. He's doing a PhD in biochemistry. I think he's done by now...", Kevin telling us stories...

"Ok, that's quite an IF, to say Banks are smart", Kevin, replying to a Student saying "If Banks are smart blabla"

"It's only stupid when you do it when you get paid", Kevin, on us using WACC not really understanding its intuition. He simplified it as OCC (opportunity cost of capital), for which even a simple less than 5 words definition was difficult to us.

On Sarbanes Oxley Act (Sox, or sucks...)

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