Q: How did you gravitate into turnaround/restructuring work?
Magee: It certainly wasn’t something I thought about coming out of the business school at the University of Virginia in 1983. I wanted to be a city office banker in Baltimore, Richmond, Charlotte, or Atlanta. First Union offered me a job in Charlotte, so I went to work with them.
In the mid-‘80s, a city office corporate banker—and I was a team leader—handled all aspects of the customer’s relationship. You sold, underwrote, and managed your credits, and you delivered the entire bank to the customer. We didn’t specialize by industry or size, so we had all types of industries and worked with companies as small as a couple of million dollars up to Fortune 100 companies. It was really a lot of fun.
While I didn’t focus on turnarounds back then, we had a cradle-to-grave approach to credits. If you inherited a bad loan, you worked it out, and you learned from the experience. I did get to work with some troubled credits even while I was on the good side of the bank.
Eventually, First Union bought some troubled banks in Virginia. By that time, the OCC (Office of the Comptroller of the Currency) had convinced First Union that if it ever wanted to make more acquisitions, it should invest in a more robust special assets function. I volunteered to go to Virginia, in part because it was closer to Baltimore, which is where I grew up. I was told that the only place we needed people was in special assets. At the time, I didn’t know what special assets was—they had to explain it to me.
My formal introduction to turnarounds occurred in 1993 when I moved to special assets in Richmond. That broadened my experience and was a lot of fun. When I rotated out of special assets, I thought I was done with turnarounds and restructuring. But I was wrong.
I was recruited to join a middle market strategy consulting firm. It turns out that middle market firms don’t hire strategy consulting firms unless what they really need is financial advisory, turnaround, and/or restructuring services. I ended up getting my CTP because strategy consulting in the middle market, at least with that firm, involved doing turnaround work. I’ve been doing that full-time since ‘97. That’s how I got involved in turnaround consulting—it was kind of through the back door.
Q: What have been some of your most gratifying, favorite, or important engagements along the way?
Magee: One was a multidivisional New York Stock Exchange company with a negative net enterprise value. I was engaged to restructure the firm and develop a plan for dealing with the bank and the insurance company lenders. We ended up restructuring the debt as part of a series of transactions that involved selling off a third of the company and splitting the remainder into two separate companies, one private and one public. That was exciting and fun, and it was nice to take a company with a negative net enterprise value and turn it into a survivor. In fact, the company is still in business today.
In another gratifying engagement, I was engaged to perform a comprehensive assessment of an overleveraged company that was involved in manufacturing, importing, wholesaling, and retailing in the home furnishings space. In the middle of the engagement, the company faced a severe liquidity crisis. The liquidity crisis was completely unexpected, and the board’s initial response to the crisis was to decide to shut the company’s doors.
I convinced them that wasn’t necessary, and I arranged for a stopgap to solve the liquidity problem and ended up restructuring the debt. I was eventually appointed president and CEO. This is a family-owned company, and after a period of time, I turned it back over to family management. The company continues to thrive today.
Q: Things have changed a lot in the turnaround realm since the ‘90s. Can you compare how things were back then to how it is today?
Magee: There have been a couple of major changes. One that occurs to me is the growth and importance of non-bank lenders today. When I say non-bank, I mean nonregulated. A second is the growth in the trading of distressed assets and how much more efficient that has become. Those two things have changed significantly how turnaround practitioners do their work and how institutions deal with troubled credits.
Q: It seems like turnaround consultants used to do more operational work, and there doesn’t seem to be as much of that. Is that true?
Magee: Aurora Management Partners is very much a debtor firm, and we do work with our clients on operational and financial restructurings. We do get very much down into the details of how to improve the operations of the business. It’s not all just financial engineering or refinancing.
Q: Would you say there’s more of that industrywide today than in the past?
I think there’s a greater willingness on the part of lenders to transfer credits to investors who have more of an equity orientation than a strictly debt orientation. Those people tend to be more willing to step in as active operators.
Q: What have been some of the milestones in your career that have made you the professional you are today?
Magee: I think one of the biggest shocks in my career was the first time I stepped in as president of a company. I was appointed on a Sunday night, and on Tuesday morning, I realized we didn’t have funds to meet payroll on Friday for 2,200 employees.
I’d never been faced with a situation like that in that role before. As a banker, when a customer came to me with a similar situation, I told them that it was their problem and not mine. Now, I had to make sure that the lenders understood that this was also their problem; if they didn’t help solve it, there were going to be dire consequences for them. I was able to convince them of that, and they funded payroll.
When I was doing strategy consulting, I worked with a guy who was very fond of quoting Michael Porter and Peter Drucker. He used to quote Porter as saying, “The essence of strategy is choosing what not to do,” and Drucker as saying, “Culture eats strategy for lunch.” Those quotes have stuck with me as a way of looking at the big picture of what clients do and do not do as part of their strategy, and how they execute. That perspective is fundamental to the way Drucker and Porter look at things, and I think that’s had a big influence on me.
Q: What role has your TMA membership played in your career?
Magee: For me, it’s been invaluable as a source of contacts and as an educational resource. I think the CTP program and certification is an invaluable resource for people as they get into the industry, and it’s also a significant seal of approval—somewhat like the Good Housekeeping Seal—that the individual has certain experience and education and familiarity with the academic, legal, and regulatory issues that are important to understand in a turnaround.
Q: What advice would you have for someone who was new to the industry or was thinking about getting into it?
Magee: I would strongly encourage them to pursue the CTP and to take advantage of the educational and networking opportunities afforded to them by TMA. Members are generally very willing to help others in the organization. It’s a great way to keep up with what’s going on in the field.
Q: Are you expecting an influx of people into the field as business picks up later in the year?
Magee: I think there’s probably enough capacity, enough professionals, in the turnaround industry right now to handle the work that’s likely to come. If there isn’t, more people will gravitate to the field.
I think what you’ll see, particularly in a number of law firms, is a change in the mix of work for lawyers who are multidisciplinary and don’t focus only on turnarounds, bank work, or bankruptcy. They will end up spending more time on turnaround- and restructuring-type work than they might have. Some of the banking lawyers have been very busy with amends and extends that are independent of actual turnaround- or restructuring-type assignments.
Q: And you’re already seeing some of the large law firms adding restructuring lawyers, too, including entire groups from other law firms.
Are you keeping busy?
Magee: It’s been a mixed bag. We had a good year last year, but we keep thinking this year is going to be superb. The tsunami has not arrived yet.
Q: I’ve heard people predicting that the last half of the year will be busy. It seems all of the money that was pumped into the economy by the federal and state governments over the past year did what it was supposed to do.
Magee: I think the regulatory guidance from the banking authorities had something to do with it, too. They were allowing borrowers to defer payments and restructure loans without having to put up reserves for them or consider them to be TDRs (troubled debt restructures). That had a big impact on it.
Q: What are you passionate about outside the office?
Magee: This is probably the wrong year to ask that question. I feel like my handicap should have improved, but it hasn’t. I really haven’t been playing much golf. I haven’t been getting out and haven’t been doing as much traveling as I’d like. So, I’m looking forward to 2021 being a much more exciting and eventful year than 2020 was.
Q: What did you like to do before the pandemic?
Magee: I like to play golf and travel some. I like getting outside with my family. I have not been doing much outdoors. It’s been a very sedentary year. I’ve spent way too much time playing bridge online this year.
Q: What kind of travel do you like to do?
Magee: I like going to the beach or going to the mountains. My preferred trips are driving trips in and around North and South Carolina.
Q: What might people who only know you professionally be most surprised to learn about you?
Magee: I guess that I wasn’t always in finance or consulting. Prior to settling in to do this, I had a number of interesting jobs. I was an assistant tennis pro. I was a bartender in an Elks Lodge. I sold encyclopedias door-to-door for a little while. I was a gandy dancer for three summers during college. Gandy dancers do maintenance work on railroad tracks. You’ve probably seen black-and-white photos of section crews with long metal lining rods to straighten the tracks and long-handled, narrow-headed sledge hammers for pounding spikes.
I think the job my kids like the most is that, for a little while, I was a Good Humor man.
Q: Of all those jobs, which one did you like the best?
Magee: Probably teaching tennis. It was outdoors. It was something I was good at, and it wasn’t particularly stressful. I enjoyed it.
Q: Where did you teach tennis?
Magee: I grew up in Baltimore, and I taught at a couple of tennis camps, and then I was assistant pro at the Baltimore Country Club. Most of the courts were grass, and playing tennis on grass is a lot of fun.