950 Third Avenue, 17th Floor New York, NY 10022 t 212.486.3600 f 212.486.3616 www.gordiangroup.com Case Study Alamo/National (Restructuring Advisory, M&A, Structured Finance) Client MBIA Insurance Corp. Situation ANC Rental Corp., (“ANC), the parent company of Alamo Rent A Car and National Car Rental, like many rental car companies, was the victim of reduced travel post the September 11, 2001 terrorist attacks in New York. With the resulting drop-off in rental volume, ANC found itself with an oversized fleet and an unsustainable capital structure. ANC filed Chapter 11 in November 2001 with over $5 billion in liabilities. MBIA insured and was at risk for approximately $3.6 billion of ANC’s car fleet financing at the time of the filing. Engagement MBIA retained Gordian Group to assist in working out its exposure to ANC. We analyzed ANC’s strategic and financial situation, developed strategies to reduce MBIA’s exposure and assisted MBIA in its negotiations with prospective acquirers of ANC. Outcome Through a combined strategy of tough negotiating and active support of ANC’s operational and financial restructuring efforts, MBIA’s exposure was reduced by more than two-thirds, while the fees it earned from ANC quadrupled. Moreover, MBIA has not reported any losses, to date, due to its exposure to ANC and its exposure has continued to shrink. 950 Third Avenue, 17th Floor New York, NY 10022 t 212.486.3600 f 212.486.3616 www.gordiangroup.com Case Study Ambac (Financial Advisory, Structured Finance) Client State of Wisconsin Office of Commissioner of Insurance (“OCI”), which is the regulator for Ambac. Situation Ambac Assurance Corp., (“Ambac”), the bond insurance unit of Ambac Financial Group, was suffering enormous losses on its structured finance book, mostly from insurance contracts tied to subprime residential housing. It had been downgraded to Ca (Moody’s) and ceased writing new business. There was market speculation questioning its solvency. Engagement Gordian Group was engaged as joint financial advisor (with Jefferies & Co.) to OCI to assess potential claims in Ambac’s portfolio, review potential remediation strategies and work with the parties to develop courses of action to handle policyholder claims. Outcome Working with OCI and its legal advisors for over two years, Gordian developed and negotiated an innovative restructuring plan for Ambac that contemplates: (i) commuting CDO of ABS claims at a significant discount, (ii) placing RMBS policies, credit default swaps and certain other policies into a segregated account (which will be run off), and, (iii) preserving significant value for municipal policyholders, Ambac’s historic core customers. The transaction was announced in March 2010. 950 Third Avenue, 17th Floor New York, NY 10022 t 212.486.3600 f 212.486.3616 www.gordiangroup.com Case Study Heilig-Meyers (Structured Finance, Litigation Support) Client Securitization Plaintiffs Situation Bank of America had underwritten various tranches of a securitization of installment sale receivables for Heilig. The securitization was a failure, and investors lost a substantial portion of their investment – despite high ratings from credit agencies. Engagement Gordian Group was retained as an expert witness for the plaintiffs in litigation against Bank of America by holders of the Heilig-Meyers securitization instruments. Based upon extensive analysis and document review, Gordian determined that high and undisclosed loss rates ate away at the collateral and ultimately caused the trust underlying the securitizations to fail. Henry Owsley produced two expert reports and testified in deposition detailing the analysis he performed that led to these conclusions. In 2008, Henry Owsley testified before a jury in federal court in the Southern District of New York that, based on extensive quantitative analysis, he had determined that these securities were doomed to fail. Outcome Owsley’s testimony was an instrumental part of a verdict in favor of the plaintiffs in this case, resulting in a full recovery of more than $140 million. 950 Third Avenue, 17th Floor New York, NY 10022 t 212.486.3600 f 212.486.3616 www.gordiangroup.com Case Study LTV Steel (Restructuring Advisory, Structured Finance) Client Abbey National Situation Abbey National was the substantial owner of $250 million of an accounts receivable securitization in the second LTV bankruptcy. At the beginning of the case, the judge stunned the securitization world and converted Abbey National into an involuntary DIP lender by rejecting the concept of the securitization as being “bankruptcy remote”, and folding the assets into LTV on about an hour’s notice to Abbey National. Engagement Gordian Group worked closely with the Company in developing and modeling various ﬁnancial outcomes. Despite being placed “Behind the 8-ball” in short notice, we actively negotiated with various constituents to develop a creative solution to ensure full recovery for Abbey National. Outcome Gordian Group and special counsel advised Abbey National and effected a complete recovery of its $250 million. We developed a plan to negotiate for certain rights vis-à-vis a parallel inventory securitization that was folded into LTV, and we negotiated for exit triggers that ultimately resulted in Abbey national being paid 100% of its claim at the end of the bankruptcy. 950 Third Avenue, 17th Floor New York, NY 10022 t 212.486.3600 f 212.486.3616 www.gordiangroup.com Case Study MBIA/Spiegel (Restructuring Advisory, Structured Finance) Client MBIA as insurer of a securitization of Spiegel credit card receivables. Situation Spiegel entered Chapter 11 in 2003 due to, among other factors, uncertainty concerning the release of timely financial information. Spiegel had securitized its private label credit card receivables which resulted from credit card purchases at its Eddie Bauer stores and its Spiegel and Newport News catalogs. The securitizations aggregated approximately $2.0 billion, of which $1.4 billion was insured by MBIA. Engagement Gordian Group was retained to advise MBIA with regard to the Spiegel bankruptcy and the related securitizations. This engagement involved extensive modeling to predict cash flows of the securitization portfolios. Outcome The matter reached an extremely successful conclusion for MBIA. 950 Third Avenue, 17th Floor New York, NY 10022 t 212.486.3600 f 212.486.3616 www.gordiangroup.com Case Study Zale/Gordon Jewelry (Restructuring Advisory, Structured Finance, Access to Capital, Litigation Support) Client Unsecured Creditors of Gordon Jewelry Situation In 1989, Zale purchased Gordon Jewelry, the nation’s second largest jewelry retailer, in an acquisition financed largely with debt. Zale itself had earlier been taken private through a leveraged transaction. The combined companies’ sales represented approximately 10% of the U.S. fine jewelry market. As operating results at Zale and Gordon Jewelry deteriorated significantly, and the companies were no longer able to meet their substantial debt service requirements, certain Zale bondholders filed an involuntary bankruptcy petition against the Company. Gordon Jewelry’s unsecured creditors opposed the bankruptcy process as originally contemplated and sought a separate reorganization for Gordon Jewelry. Engagement Gordian Group was engaged by Gordon Jewelry’s unsecured creditors to advise with respect to preserving the flexibility for Gordon Jewelry to reorganize independently from the other Zale entities. Gordian Group was able to successfully overturn Zale’s exclusivity with respect to filing its POR, develop a controversial “stand-alone” plan, debunk the debtor’s original internal POR, which Gordon Jewelry’s creditors found objectionable and negotiate a consensual POR. Gordian was able to effectively argue fraudulent conveyance to thwart Zale’s efforts to implement a DIP financing that would have harmed Gordon Jewelry creditors as well as to secure an alternative unique “exit” financing vehicle that would have allowed Gordon Jewelry to exit bankruptcy independent of Zale. Outcome As a result of Gordian’s ability to prevent Gordon Jewelry from being powerlessly assimilated into the Zale collective at the outset, and burdened with the DIP-related obligations without any benefit, the Gordon Jewelry creditors were able to obtain a significantly higher recovery. Gordian Group’s strategizing, testimony at the seminal DIP hearing and negotiating tenacity gave rise to a positive result for its clients in a distressed and complex situation.