Fall 2018 Newsletter

April 10, 2019

2018 FALL MEMBER NEWSLETTER

Message from the President

Brendan G. Best, TMA Detroit Chapter President

As your 2018 - 2019 President, I am proud to report that, thanks to all of our members and their very hard working Board, Programming Committee, and all of our other committees, TMA Detroit will have an incredibly strong finish to 2018. At our August 17 NextGen event at Detroit Axe, legends were made and a lot of fun was had by all. Congratulations to Nextgenners Will Thompson (Varnum) and Nicole Sappingfield (Dickinson Wright), winner and runner-up in the first ever TMA Detroit Axe throwing tournament. On November 7, our Network of Women (NOW) presented a timely panel discussion entitled "Navigating Tax Reform: What Your Business Clients Need to Know" held at the Detroit Golf Club. We had almost 40 attendees. We will also be putting on another luncheon panel to discuss the effects of the recent steel tariffs, Translating the Trade Situation: Tariffs, NAFTA 2.0 and What It All Means, on November 26th at Dickinson Wright. Finally, of course, there will be holiday party on December 5 at the Birmingham Country Club. Clearly, with turnaround, restructuring, and insolvency activity picking up, and an active and energized Board and membership, it's a great time to be a TMA Detroit member!

Thank you for your continued support!

Brendan G. Best

President - Detroit Chapter

Leveraged Loans: Rapid Growth and Deteriorating Credit Standards

By John L. Klehm

Leveraged Loans are popular with both borrowers and lenders. Maybe too popular.

Leveraged loans are commercial loans made to less creditworthy borrowers by banks or non-banks that carry elevated risk of default and higher pricing. This is often due to under collateralization and poor credit profile. Leveraged loans present elevated risks to investors that could have wider consequences.

Regulators are starting to raise red flags with respect to Leveraged Loans. Analogies are made by some to the subprime mortgage crisis and the systemic risks those presented. One thing is certain, the leveraged loan market has grown dramatically in the past few years and risk management and credit quality have deteriorated.

Borrowers typically use leveraged loans to fund acquisitions, pay dividends to equity holders, or restructure the balance sheet. This debt is desirable to companies that are too small to access the junk bond market or larger companies that prefer lower initial interest rates.

Banks and non-bank originators often syndicate leveraged loans or package the leveraged loans into collateralized debt obligations (CDOs) similar to the bonds backed by subprime residential mortgages that contributed to the financial crisis. Investors, including ETFs and mutual funds, buy CDOs due to their higher initial yield, which only increases when interest rates rise. The total leveraged loan market recently passed $1.4 trillion. That is larger than the junk bond market.

As investor demand has grown, lender protections have dwindled. Financial covenants, common in bank loans and historically in leveraged loans, have greatly diminished. In fact nearly 80% of all leveraged loans originated in 2018 are what's called "covenant lite." Examples of common protections investors are giving away include prohibitions on incremental debt and asset stripping in which investor collateral is removed without compensation and the sale of assets without a corresponding pay down of debt. Rating agency Moody's recently noted that covenant protections are near the worst ever levels.

It is this combination of large volume and limited covenants that has driven calls for more stringent regulatory oversight. Junk bonds are overseen by the SEC. Bank loans are regulated by various state and federal agencies. Leveraged loans are often originated by unregulated non-banks or large regulated banks. But once the loans are packaged and sold, there isn't any supervision.

Former Fed Chair Janet Yellen recently raised alarm bells over the rapid growth and lack of oversight in the leveraged loan market. She recommended changes to banking regulations because she thinks these loans will worsen in an economic downturn due to increased bankruptcies and damage to investors, who unlike banks, don't hold reserves for future defaults.

Whether the current leveraged loan market represents systemic risk is uncertain, but the opinion of a former Fed Chair ought to be seriously considered. What is certain, however, is that strong borrower and investor demand has created an enormous amount of debt owed by companies with apparent limited ability to repay that debt when economic conditions decline, which they eventually must do.

So You're Going To A Business Holiday Party . . .

by Doug Brown, ASTI Environmental

I would like to share some helpful tips on how to attend a Business Holiday Party and what pitfalls to avoid. I am a bit of an expert as I have broken just about every rule I will cite:

· Set a goal: Notice the first word in Business Holiday Party is Business. Your goal is to earn a business opportunity not "win the party."

· Bring business cards: It happens way more than you might expect.

· Arrive early / leave early: The host or keynote speaker will be accessible early in the evening - connect with them before it gets too crowded. Leave when there's a lull or the volume of the conversation starts to lower.

· No devices: Leave the cell phone, BlueTooth, iPad, Blackberry, iPhone, iMac, iDon't Care in the car - no one cares how fast you can move your thumbs when your business prospect is sizing you up. Your text can wait - you are really not that important :), and if you were, you would have an administrative assistant that handles your routine communication.

· Bring your own name badge: Yes this sounds a little weird, but your name sloppily handwritten with a heavy black sharpie does not make a good first impression. Also, if the adhesive or clamp on the back of your name badge has ever ruined your clothes you know what I mean.

· Talk to strangers: Forget what your mother told you and talk to strangers. Engage the first person you make eye contact with in a conversation and see where it takes you. There's nothing worse than hovering around "Mr./Ms. Big" waiting to lay your witty line on them along with everyone else.

· Look your prospect in the eye: Don't let your eyes wander around the room looking for a "better" prospect - have the courtesy to give your undivided attention to the person you are engaged with. Politely excuse yourself, "I'm going to circulate," if the conversation is strained or if this individual is not a suitable prospect for business.

· You are not Funny: Unless you are Kevin Hart or Will Ferrell don't try to be funny. You are at a business meeting trying to make a professional connection that can help grow your business.

· Active Listening: Be a good listener and give positive non-verbals (head nods etc.). People are often more impressed and will open up when you pay attention to what they have to say (feign attention if they are boring the bejesus out of you).

· Topics to avoid: My mom always said to stay away from religion, cars and politics when trying to be a good conversationalist and my mother was always right. Quoting Rush Limbaugh or Rachel Maddow will not win you many friends.

· Watch the drinks: No one does business with the life of the party and they are rarely amused by them. If it's cocktails only, drink ginger ale or club soda and let 'em wonder what's really in your glass.

· Recap instantly: Because your device is in the car, find a quiet place to write down as many details from your conversation as you can on the back of the prospect's business card or an index card. Sound crazy ?? It works. I guarantee that if you do not recap the conversation at that moment you will mess it up the next morning when you try to remember what you discussed with whom.

· Identify all attendees: Ask your host for a list of attendees so you know who to connect with afterwards. The worst they can say is no and half the time they will provide it. One follow up question for an important prospect you missed could be "I missed you at ______'s gig, can you take a quick call to catch up ??

· Put it in writing: Drop everyone you spoke to a hand written note (not an email) the next day and include your business card - assume they forgot who or what you are, and lost or pitched your business card "by mistake."

Membership Spotlight

Mary Anne LaMarre, CAE

New Chapter Executive

Q: How did you first hear about the TMA?

A: I had belonged to the Michigan Society for Association Executives ("MSAE"), and the Turnaround Management Association ("TMA") is an association member. When I decided to look for my next career adventure, I turned to the MSAE to see what opportunities were out there. And TMA had an exciting opportunity!

Q: What do you look forward to assisting on with the Detroit TMA Chapter?

A: I am excited to meet the board members, sponsors, and members at large. I intend to assist the board in driving the Chapter to achieve its stated goals and objectives. I hope to work with current sponsors and assist the board in securing additional new sponsors. I will be an advocate for the member base, so if anyone needs help with anything please reach out!

Q: What have your previous experiences been?

A: I've worked over 25 years with various not-for-profit associations. I spent 19.5 years with an international association that was based in Jackson, MI, where I currently live, and have also worked for an association management company in Ann Arbor where I was the staff executive for two state associations.

Q: Since you have a lot of experience working with associations, what is it that draws you to this area?

A: Before working with associations, I had experience working in sales, but found that wasn't for me. I was drawn to associations to learn about the specialties and niche experiences that the members and boards bring to the table. I am truly impressed with the level of knowledge that exist at associations for their industry and specialty. As an association executive, I get to touch all the different areas of the association, which means there is never a dull moment. I enjoy working on events (who doesn't like to throw a party), help with membership initiatives, and assist with securing new sponsors. I find it rewarding working with people that all have different backgrounds but share a common link and want to drive results for their particular association.

Q: Anything you can leverage to help you and/or the Chapter?

A: In 2016, I received the Certified Associate Executive certificate ("CAE") (only about 4300 throughout the world and less than 150 in Michigan). I view that certificate and education as great benefit for myself as well as for the Detroit Chapter. I'll be able to leverage knowledge from that course to bring new ideas and different perspectives to the Chapter and the board. Achieving the CAE certificate is akin to getting the Certified Turnaround Professional certificate ("CTP"), that I know many of the members have.

Q: On the personal side, tell us about yourself.

A: I am married and have three grown children. My husband and I like to travel, mostly to see the children who live in Florida and Chicago. My son plays Major League Baseball, so during the summer we travel to various ballparks to watch him play. Bowling and golfing are some activities I'll do for ladies night out. I also enjoy spending time with my extended family; I have eight brothers and sisters. I'm also a Central Michigan Alum-go Chips!

Amanda Vintevoghel, President Elect, introduces our panel discussion.

NOW Members and guests enjoy the presentation and lunch.

Guest Panelists; Jim Rocchio, Strobl & Sharp PC;

Tammy Moncrief, Yeo & Yeo CPAs; and Nicole Preston, Doeren Mayhew.

TMA DETROIT NETWORKING @ Detroit Axe

October 17, 2018

Ferndale, Michigan

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