Distressed Debt, Market Conditions Provide Growth Opportunity

With the Federal Reserve signaling that it’s prepared to increase interest rates, investors are anticipating a new wave of distressed debt triggered by higher costs of capital.

Turnaround specialist Mackinac Partners (now Accordion) is seeing that bet — and raising it.

Seeking a bigger footprint in one of the few corners of Wall Street where job prospects have improved since the financial crisis, the Bloomfield Hills, Michigan-based firm is beefing up its financial advisory business, opening new branches in Chicago and Boston and nearly doubling its team to 34 associates, James Weissenborn, Mackinac’s founder and managing partner, said.

With bankruptcy filings on the rise, many industry experts predict that corporate restructurings will climb over the next two years in the face of tightening financial conditions.

A survey in January by AlixPartners found that 78 percent of restructuring industry professionals expect activity to remain steady or increase this year, even after Chapter 11 filings rose 26 percent in 2016. Laura Davis Jones, a managing partner at the Delaware office of Pachulski Stang Ziehl & Jones LLP, said the real increase in distress will come once the Fed raises rates more significantly, by around 150 to 200 basis points.

Branching Out

“For a lot of companies that are close to the edge and are having problems, when interest rates are low it’s fairly easy to prop them up with some money until you figure out what you’re going to do. You put a band-aid on them,” Jones said. “If rates go up, it starts to get more expensive to do that.”

Mackinac’s recent and pending hires include several new directors for its Chicago office, Weissenborn said. Melissa Kibler, who most recently was with Mesirow Financial Inc., is senior managing director for the new branch. Michael Nowlan, previously a managing director in FTI Consulting’s corporate restructuring group, is heading up the Boston office that opened in November.

In addition to its Michigan headquarters, the firm also operates branches in Santa Monica, California, and Dallas, where it plans to add several new hires this year.

Mackinac specialists recently have led the restructuring of the steakhouse chain Logan’s Roadhouse Inc., managed the bankruptcy and strategic assets sale of Quantum Fuel Systems Technologies Worldwide Inc., and served as interim chief financial officer and financial adviser to Real Mex Restaurants Inc. following the casual dining chain’s Chapter 11 filing in 2012. The firm won a Global M&A Network “Turnaround of the Year” award in 2016 for its work restructuring the debt of firearm supplier Colt Defense LLC.

About Accordion

Accordion is a private equity-focused financial and technology consulting firm. Working at the intersection of sponsors and management teams, Accordion partners with clients at every stage of the investment lifecycle. The firm’s services span the entire CFO function within the private capital sector, including operational and technical accounting, strategic financial planning and analysis, CFO-driven transformation, CFO technology, transaction execution, public company readiness, interim leadership, and turnaround and restructuring. With a focus on hands-on, results-oriented execution, Accordion is widely recognized as the go-to PE consultancy and the premier digital-enablement partner for portfolio CFOs. In addition, Accordion has been recognized as an employer of choice for pioneering a better way to work in finance. Accordion has a total of 9 offices including its headquarters in New York and locations in Boston, Charlotte, Chicago, Dallas, Detroit, Los Angeles, San Francisco, and South Florida.