Creating Value Through Corporate Restructuring by Stuart Gilson is a collection of case studies by the author and his colleagues involving the three major forms of corporate restructuring: restructuring liabilities, restructuring equity, and restructuring employee claims. The book is a doorstop - the 2nd Edition reviewed here clocks in at 802 pages counting all appendices - but it is well worth your time. Debt restructuring occupies the majority of the book (a bit less than 500 pages) but given the interests of its likely readers that seems like a plus. It provides 22 case studies (12 debt, 6 equity, and 4 employee claims) that span a broad spectrum of industries and also venture outside the U.S. to examine the reorganization process in other countries.
The only real problem with the book isn’t its content, but rather the expectations that its title will generate. Although the book discusses the situations and processes through which value is created for creditors, shareholders, and other interested parties, it doesn’t provide a how-to on the subject in the way that some might expect from its title. Readers expecting to have direct investment wisdom delivered to them will probably be disappointed. The second edition devotes an entire chapter to the mechanics and risks of investing in distressed situations, but the focus is once again on the abstract process rather than the nuts and bolts of how to make money as an investor. The book’s focus is on restructuring as a process rather than investment in a restructuring and on examining the situations rather than having answers spoon-fed to you. I see this as a positive, since it encourages readers to stretch themselves a little and put their analytical skills to work, but others might disagree.
On a related note, I love the case study format of the book and I really wish more non-academic books would employ it. It’s a slightly skewed comparison to place this side-by-side with books written for a slightly less academic audience, but think about (if you’ve read it) the examples provided in Joel Greenblatt’s book on special situations investing, You Can Be A Stock Market Genius [incidentally, that’s a a great book and I’m not trying to knock him]. Although he provides sufficient information about the different investment opportunities he exploited (Marriot, General Dynamics, etc.) to give readers a good sense of how he did it and how they could do the same, the reader’s perspective is somewhat limited by necessity. Greenblatt is trying to produce simple, practical guidelines rather than fully explore the process. That’s obviously useful from an investment standpoint, but it has its limitations. The greater level of detail and breadth of information within case studies provides readers with a better sense of the “big picture” and better enables them to practice exploring the same wealth of data that exists in the real world where there isn’t a handy-dandy author to sort through it all and deliver the most relevant details.
The case studies contain a fascinating amount of detail and give the reader a clear sense of how a company dug itself into a hole, as well as the informational tools to evaluate what it might do to climb back out. One case that I particularly enjoyed was the reorganization of the restaurant chain operator Flagstar Companies. The origins of the distressed situation (failed LBO) are particularly interesting given that the takeover market will always be around to provide fresh fodder for distress investors and reorganization specialists.
It’s pretty clear by now that this is an enthusiastic thumbs-up. This book isn’t for everybody - the size, technical detail, and price tag (a not-inconsequential $95 cover price) make it unappealing for readers who aren’t serious about the subject - but for those for whom it’s relevant this is a fantastic resource.
As a side note, it’s interesting to see the consistent recurrence of a few familiar faces, like David Tepper’s Appaloosa Management. People tend to comment on and follow his stock picks and opinions on the equity markets, but few really focus on his success (and origins) as a bond investor.
Additional disclosure: I received a review copy of this book.