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Susan M. Smith: Backyard 'Restructuring'

Susan Smith

Susan M. Smith is a senior managing director with GlassRatner Advisory and Capital Group LLC in Tampa, Florida. She has more than 20 years’ experience in financial advisory services, including turnaround management, bankruptcy and restructuring consulting, and litigation support. She has served as both financial advisor and interim CFO for companies in need of financial improvement.

Smith has provided expert testimony in insolvency, preference, and fraudulent transfer adversary actions, and has testified numerous times to support of her clients through debtor-in-possession (DIP) financing and plans of reorganization. She also assists clients with negotiations and communications with boards of directors, lenders, and government agencies.

Smith is a past president of the TMA Florida Chapter and currently serves as its treasurer. She is a CPA and a Certified Insolvency and Financial Advisor (CIRA).

Question: How did you gravitate into turnaround/restructuring work?

Smith: I went to work around 1990 for a CPA firm where one of the partners was a bankruptcy trustee. Besides doing all the normal CPA work—bookkeeping, taxes, etc.—we did everything he needed to do for the accounting and operational issues for his Chapter 7s and Chapter 11s. And, of course, he was hired to do all the accounting work by other bankruptcy trustees because they were generally lawyers. That was my introduction into it.

After a few years there, I decided to finish my CPA, so I went back to college for the rest of my accounting classes and got my CPA. Then I went to work for KPMG. There we did more Chapter 11s and financial advisory work because we were dealing with more national companies and not just local companies.

So my foundation would be at KPMG, where we were working with a number of large companies and helping them go through the restructuring process. I was in the Corporate Recovery Group, which was under their Financial Advisory Services Group. 

Q: So you had decided to specialize by that point?

Smith: At that point, I had decided to specialize. I like to fix things. I like to go in and find out what the problem is, what went wrong, and how to fix it. My experience and my fun is dealing with the numbers. A lot of times companies don’t understand why they’re having trouble, and somebody has to go into the financials and look around and say, “OK, you’re losing money here,” or “You’re not doing this right here.”

A lot of companies—and you’d be surprised how many big companies do this—are so fixated on accrual books that they pay absolutely no attention to the cash. You can have all the accrued sales you want. Your top line can be growing like crazy, but you can run into cash flow problems. A lot of companies just aren’t prepared for that. 

You can figure that out by digging into their financial statements and their books and records and help them plan, prepare, and fix that particular situation. Then they can take off and grow. That’s what I’ve found to be the most fun.

Q: What I found interesting in looking through your biography was that you seem to do a lot of cases that involve fraud. 

Smith: You can’t get into this line of work without encountering fraud. Fraud is both a reason that companies encounter cash flow problems and a consequence of the problems. Sometimes companies have someone inside skimming the cash or product, which leads to cash flow issues. Other times, declining sales or a shortfall of cash leads the management team to hide the problem in the financial statements. That works until it doesn’t.

The CRO or financial advisor has to go in, examine the books, and get the financial information straightened out. I always look for fraud as part of the search for figuring out what the problem is.

Q: What have been some of your most gratifying or favorite engagements?

Smith: One was Budget Rent a Car, Budget Group. I was financial advisor to Budget Group in preparing them for bankruptcy and running them through bankruptcy in 2001. We sold the assets to Avis, and Avis took the assets and all the people. That left nobody running the bankruptcy estate except me.

I ended up doing all of the accounting work, all of the financial work, most of the work in finalizing the estate and helping it through the tax and accounting issues and preference actions, litigation, to close the estate. It took several years. It was a very large company, of course, when it was operational. That was the first time I’d handled so large a company through the whole process, and it was a lot of fun.

The other case that probably was the most interesting was USA Commercial Mortgage. It was a Las Vegas firm. Management took money from investors, many of them retired, pooled their money together, and invested in commercial mortgages. They would pool money from 50 or 60 people, and they lent that to a developer. 

Of course, in 2005-06 the bottom started dropping out of the real estate market, and some of these loans went bad because they were lent to very speculative ventures. The gentleman who was running this didn’t tell these retired people that the loan they had invested in was going bad. He just kept paying them. So, of course, he paid them with other people’s money. Instead of giving the money back to an investor whose loan was actually paid off, he used the money to make payments to all the investors.

We were dealing with 5,000 or 6,000 people who had invested in his projects. A lot of them were elderly. A lot of them had given him their retirement money. He was paying them 12 percent interest at a time when interest rates were a lot lower. My recollection is that they were more like 4 or 5 percent at that point, and they couldn’t live on that, so they had given him their money to get 12 percent interest. And then they were faced with possibly receiving no money. 

We had to deal with all of their upset and problems, and figure out where the money went. We had to figure out how to foreclose on some of these projects and get some money back in for investors. One group of investors got 75 percent of their money back. Some of the others for whom we got their loans to pay off got 100 percent of it back. For others, we were able to get a percentage of it back to them. 

They ended up in a lot better shape than they could have, but it was a very long and painful process for them. It was actually one of the more interesting cases I’ve worked on. Where did the money go? Who got it? Then in tracing it and trying to find the assets so that we could bring them back into the estate, sell them, and pay people. 

Q: Were you dealing directly with the investors in that case?

Smith: I had to do several town hall meetings where we invited the investors to come in, ask us questions, and run through the accounting and their revised statements. We explained what had been going on in the bankruptcy process. It was pretty bad. People would come in holding their old statements and say, “It says right here I have this money.” And we had to tell them that they had been lied to.

Q: That must have been heartbreaking, dealing with retirees who were unwise enough to move too much of their retirement money into one vehicle.

Smith: You can understand why they did it, but it was very heartbreaking. We had people come to court hearings with their oxygen machines, saying, “I need my money. I have to pay for my medical bills.” 

The ones that I feel sorriest for are those who ended up in some of the projects that were in litigation. It took them a lot longer to get a return. Unfortunately, so much delay for people who are older is a big problem.

The principal of that company went to jail for 12 years for wire transfer fraud, and I think that actually made a number of them feel better. 

Q: What role has your TMA membership played in your career?

Smith: I joined TMA fairly early in my career. TMA taught me how to network. I didn’t have a mentor or a boss who took me out to introduce me to people. TMA gave me a group of people to network with. They welcomed me into the group. They helped me to meet other professionals. I found that I could meet lenders, investors, lawyers, auctioneers, equipment people—everything I needed.

The people I met through TMA are the people I’ve used all of these years when I’m working with a company that needs financing, for example. I have a whole list of TMA members that I can ask to help me, whether it’s for DIP financing or for financing a company that’s not in bankruptcy. If I have to sell equipment, I have people from TMA who can do that for me. If I need a lawyer who specializes in something, I’ve met them through TMA. It’s been a fabulous place to network and find people that I can work with because you can’t do restructuring without all of these other people to help you through the process.

I started networking locally, of course, and when I became Florida Chapter president I started going to national events, and I met people from all over the country. And in today’s world, you’re all over the country. From one of my most recent projects, their headquarters was in Clearwater, Florida, near me, but the operations of the company were in New York and California. Where do I find New York and California contacts? I find them through my TMA connections. I have people I can reach out to all over the country for help in various areas. In today’s world, you’re not local. It’s just not possible.

Q: Have you always been with the Florida Chapter? 

Smith: I started in Dallas. I was on the board there for a number of years. Then I moved to Florida. I volunteered to help out with the TMA Chapter in Florida. They invited me onto the board and put me in charge of programming. A few years later I became president of the organization. Now I’m functioning as treasurer. Through being the president of TMA Florida for a couple of years, I’m on two or three national committees, including the Finance Committee and the CRRC (Chapter Resource and Response Committee). I also help with some of the conferences, including the TMA Southeast Regional Conference. I’ve moderated panels for regional and local conferences.

Q: And that’s the key to getting the most out of TMA, that active involvement, isn’t it? 

Smith: I ask the people I meet who say they don’t get anything out of TMA how many meetings they’ve gone to. They’ll say, “Three or four.” Three or four meetings isn’t enough to get to know people. All of the sales training says you have to touch people five to eight times to get a qualified lead. Showing up for a couple of meetings doesn’t get you there.

You have to reach out and get on committees or panels, and then you become part of the network and have the connections that you need, but they have to see you for a while. You have to give it time, and you have to put effort into it. Like anything else, you’re going to get out of it what you put into it. 

When you’ve been working with these people on a committee, you’re on their mind and they’ll think about you if they have something come up that requires your services. If they met you at a TMA event a year ago, you’re not necessarily on their mind. They have to be aware of you and aware of what you do before they’re willing to push any work to you. 

Q: What advice would you have for someone who was new to the industry or was thinking about getting into the industry?

Smith: Besides join TMA, I would say don’t focus solely on bankruptcy. Too many restructuring people seem to be focused on bankruptcy, and companies can be fixed or liquidated without bankruptcy. Most equity groups that I know that are buying and selling companies don’t really consider bankruptcy to be a viable option anymore. It’s just too expensive. The board or equity is looking for people who will fix a specific problem or a general problem when they don’t know what the specific problem is, or they’re looking for you to clean up the financial picture so they can find a good purchaser for the organization. I’ve assisted companies through (Uniform Commercial Code) Article 9 sales now. ABCs (assignments for the benefit of creditors) are a lot more prevalent. Receiverships are a lot more prevalent, especially if the problem is real estate related.

Bankruptcy used to be the main tool for restructuring, and it really isn’t anymore. You have to be a lot wider in your approach to how you fix debt problems in companies and how you deal with creditors. Bankruptcy’s only one option. A person new to restructuring should get experience in solution tools other than just running a company through a bankruptcy process. 

At least in Florida, we’re seeing fewer and fewer young people coming into restructuring and into TMA, and I think it’s a real shame. I still think this is a career choice that has a lot to offer young people. I learned an awful lot about many different industries. The job’s not the same thing every day, 9 to 5. Every industry and every project that I go into teaches me something. I think there’s a lot of room for younger people to come in and learn how to analyze problems and find solutions and then go back to working in industry or work in consulting firms. I’m sorry that we just aren’t seeing as many young people joining us, and I think they need to consider this as a career path.

Q: If you could start your own career over again, would you do anything differently?

Smith: I would find a mentor. I never really had one, and I’ve seen other people climb the career ladder a lot more smoothly with a mentor. So find a good mentor. Don’t be afraid to change organizations or the group that you’re with until you find a decent one because they can go a long way to helping you get over some of the rough bumps. We’re crisis managers. If you have someone who can give you good advice on working with people and companies to get through the crises, you’re a lot better off than you are by learning through experience, which can be quite painful. 

Q: What about outside the office? What do you like to do?

Smith: I would say family. I have three kids who are mostly grown now. But I’m passionate about spending time with and enjoying family. I now have a couple of grandchildren. One of the reasons we moved to Tampa was to be near them.

Even when I was doing charity work, it was still family-focused. I was on the board of Susan G. Komen in West Palm Beach—I think it’s called the Southern Florida Chapter—but I did that because I have two sisters who were breast cancer survivors. The other boards I’ve been on have been education-related because I was passionate about education for my kids and wanted to help other kids, too. Education is just so important in today’s world. 

My husband and I like to do outdoor activities. One of the reasons I came to Florida is I like my fun in my backyard. We live outdoors, and we are in the process of “restructuring" the backyard. The yard outside of the pool is empty space, and we are adding flowers, palm trees, and flowering bushes to make our backyard a tropical paradise. We also enjoy kayaking and being out on the water. Tampa is a wonderful area with easy access to the bay and gulf.

Q: What might people who only know you in your professional capacity be most surprised to learn about you?

Smith: Probably that I do have fun with things that aren’t work-related, because they’re used to only seeing me at work. When the team is on projects it’s 24 hours a day of nonstop work, and I’ve sent review notes at 11 at night and 5 in the morning. It’s hard to find time for hobbies and other things I like to do. I am a serious accountant, and restructuring and crisis management is serious business, especially when you’re trying to fix a company that’s in real trouble. Other people’s jobs depend on our solutions.

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