The lone rearranger

The doyen of corporate restructuring is now at Nomura. Dearbail Jordan talks to Richard Gitlin about Maxwell, the IMF and being big in Japan


Culture is an important issue for Richard Gitlin. The former Bingham McCutchen partner quietly glides into the office within the rabbit warren that is Nomura’s London branch and perches on the most prominent seat in the room. It’s not that Gitlin is being an egomaniac – in fact it would be impossible to imagine this softy-spoken native of Connecticut throwing his weight around – it’s just that Japanese protocol demands that the host should sit at a vantage point in a meeting so he is able to see who enters or leaves the room at any given moment.

Right now, Gitlin is using his knowledge of cultural diversity to help Nomura win a slice of the ever-growing number of restructuring deals surfacing in the Japanese market, via his newly set-up boutique Gitlin & Co.

But it was Gitlin’s move to a small Hartford firm in 1968 that shaped the rest of his career. He says: “I realised that I loved deals, I loved running them and I knew that I didn’t want to be one part of the deal [as a tax lawyer], while someone else did all the negotiations and the strategy.”

Around this time the US was hit by what was then its largest-ever bankruptcy. The financial deterioration of railroad company Penn Central Transportation on 21 June 1970 marked the beginning of a decade where the US economy languished in the gutter.

Known as the decade of stagnation, where inflation rose but companies failed to grow, WT Walsh, the seventh largest retailer in the US, collapsed, Chrysler nearly keeled over, Watergate came, Nixon went, oil prices fluctuated and investors took a bath on heavily deteriorating real estate investment trusts. In short, the 1970s was the watershed decade for restructuring.

With his love of restructuring burgeoning, Gitlin set up his own specialist firm in 1972, displaying his rather curious mix of steely determination, self-belief and incredible pragmatism. But it was only after Gitlin roped in Ed Hebb, who he had seen lecture at various Bar Association meetings, that the firm really began to take off.

“We were in a bar at two in the morning, talking about whether we should work together, when Ed gave me a book of Robert Frost poems and said: ‘If you really want to know what I’m all about read this’,” recalls Gitlin. A scan of the poem ‘A Time to Talk’ was all the convincing Gitlin needed to join up with his new partner to form Hebb & Gitlin.

In the early 1980s Gitlin’s career as an authority on international restructuring began to take hold. He says: “In 1981 I made a commitment to learn about global insolvency and I formed the first American Bar Association committee on it.”

Gitlin spent the next seven years learning about the area while still fee-earning, despite certain reservations by Hebb & Gitlin’s then managing partner, who was curious about where all this study would take the firm.

The answer emerged in 1991 when Gitlin was appointed by the US Bankruptcy Court as the US Chapter 11 examiner on the Maxwell Communication Corporation collapse.

He says: “When the case happened, the US attorney responsible was in charge of picking someone to handle it and my name just came top of the list.”

Despite his modesty, Gitlin played an important role in sorting out the shambles that Robert Maxwell had left in his wake. Using his knowledge of global bankruptcy law, and savvy in balancing cultural differences, Gitlin smoothed the way in a situation that, at the beginning, was stuck in checkmate. The administrators had secured an injunction on behalf of the banks against the company’s management and an injunction had been issued against the administrators, thereby freezing any movement on the assets. The coordination of US Chapter 11 proceedings and UK insolvency law seemed nigh on impossible. “The idea of an examiner came up to try and harmonise the two sides,” says Gitlin.

As a result, he was instrumental in drawing up a cross-border protocol to coordinate the transatlantic courts, which was subsequently adopted as common practice in a number of similar cases.

It wasn’t an easy task. “It was a very intense, different, difficult situation,” says Gitlin. People wanted me to be more aggressive with the UK and fight for the US interest. There was a lot of controversy surrounding what I wanted to do, but I knew it was the right thing.”

In a similar vein, although on a much grander scale economically, Gitlin was also called in to resolve the financial mess surrounding sewing machine-maker the Singer Company, which filed for Chapter 11 protection in 1999.

Unfortunately, the company also happened to have a presence in more than 150 countries, meaning Gitlin had a race against time to secure the assets in each jurisdiction before their value was irrecoverable.

“In this instance the protocol was not practical because Singer was doing business in so many different countries,” explains Gitlin. “It was a balancing act, but it was basically simple because it was in everybody’s economic interest to keep the business going to maximise the value.”

Working with Jack Butler, co-leader of worldwide corporate restructuring at Skadden Arps Slate Meagher & Flom, Gitlin, in his new role as foreign representative, says: “We were empowered with the authority of the court to go to other courts and ask them for a way to stabilise the assets while the restructuring was going on.”

It is as if Gitlin still can’t believe his luck, when he adds: “Miraculously it actually worked and we reorganised Singer in about a year.”

Prior to this, Gitlin had been roped in by the International Monetary Fund (IMF) in 1997 to try and bring some order to the Asian financial crisis, specifically in Indonesia, which was spinning out of control. In this case it was again up to Gitlin to set a precedent in sorting out the financial mire. “At the time, the IMF strategy was to go in and deal with the banking systems and the macro-economic issues, which was not the best judgement because by focusing on that, the corporate sector was really deteriorating.”

Gitlin’s answer was to propose a restructuring programme rather than follow the IMF’s idea of trying to push through bankruptcy law. “Putting these laws in place would have taken between five and 10 years to work in a country which was unaccustomed to working in that way.”

Using the restructuring programme as a template, Gitlin
swapped to working for the Indonesian government and drew up the Jakartan Initiative, which introduced mediation as a means of saving companies. Gitlin says: “It had its ups and downs because culturally the country wasn’t ready to restructure, but it became the only thing that worked because the court system really was going to take a bunch of years to work.”

Fast forward two years and Gitlin had decided that the firm he had set up 27 years ago by hiring a small Hartford office for $200 (£128) a month needed a bigger platform now that it had grown to more than 50 lawyers. It was time for a merger.

At the time, Hebb & Gitlin was still based in Hartford and had a small outpost in London. But he says: “We really didn’t have the capital to build a global law firm.

“The day we decided that the firm should merge, I had a call from Bingham Dana [now Bingham McCutchen]. It was like they were eavesdropping in my office,” he laughs.

While Gitlin says he enjoyed his time at Binghams – and particularly singles out the firm’s London office for praise – it was always in the back of his mind that he wanted to start out on his own again. Through Gitlin & Co, he will play more of a business advisory role in sorting out struggling Japanese companies, while attempting to change the perception of restructuring. His position as senior strategic adviser to Nomura will give him the headstart he needs. “Basically what I’m doing is the same thing I did when I formed Hebb & Gitlin,” he says. “I’ll start with myself and I’ll just follow the same pattern 30 years later.”
Richard Gitlin
Senior strategic adviser
Nomura