Women in Credit: Full Roundtable

Rachel Ehrlich Albanese:

I am here with this amazing line up of women in the credit space. Lawyers, advisors and investment professionals, all-stars in the field. Oksana Lashko and Rachel Strickland are lawyers at DLA Piper and Willkie Farr, respectively. On the advisor side, we have Surbhi Gupta from Houlihan Lokey. And from the principal side, Stefanie Birbrower Greer from PGIM and Cindy Chen Delano from Invictus Global Management. Thank you all for joining us today.

Before we get started, I should note as a general caveat that everything that we’re saying is based on our own personal opinion and doesn’t reflect the opinion of our institutions. 

First, let’s talk about your most professionally satisfying victory in either the legal or investment arena. Oksana?

Oksana Lashko:

We did really well and delivered a rewarding result for individuals who were really counting on us in representing the Official Committee of Unsecured Creditors in Briggs & Stratton. The reason this one stands out is because of the constituency we represented. 

When you think about official creditor committee engagements, most of them start out with little to  no prospect of any recoveries. And in this case we did well. The settlement was a good settlement. And it was very satisfying to get emails from clients who were pleasantly surprised with the outcome at the end.

Also, you have individuals like retirees on these committees who worked all their lives and were counting on this retirement. And it’s real people that you’re dealing with versus large institutions and to be able to deliver some result for those people who are   counting on you during the case even if it’s not much is why we do this.

Rachel Strickland:

I think for me, the most satisfying professional accomplishment was when I decided that I wanted to get into the mass tort space. And I didn’t have any experience in it. And I had an opportunity to pitch for an asbestos trust. We probably spent about a month to get smart. And we pitched against a lot of different practitioners that had been in this space for a very long time.

And so, as a result of it, I don’t think they worked as hard, whereas we went in really expecting that we were the underdogs and we had a lot to prove. And getting it was very satisfying because it was just hard work. It was just sheer will and grit. So that was satisfying to get a mandate in an area that I really previously had known nothing about.

Cindy Chen Delano:

So I think for me, it’s a very similar combination of what Oksana and Rachel just mentioned, which is doing something that’s very familiar along the lines of saving jobs and loving the way bankruptcy and the equitable aspects of how companies and restructurings work. I recommend doing something that’s quite unfamiliar. For me, that was going to the investing side. Hanging up my own shingle and starting my own fund has been one of the scariest but also most satisfying aspects of my career. 

There are ways to collaborate. And maybe, it’s the female view. Maybe, it’s just I’m the oldest of three, so I am constantly trying to figure things out and sort of split the pie with my siblings. But there was a way that I thought you can do things differently.

So when I started out investing, I started realizing that if you have a perspective that’s somewhat different and you’re willing to do the hard work as Rachel mentioned, and do something unknown and really dig in and not just do it the same way every single time, that there were ways to create what we call alpha, what we call excess returns because you’re going to create a larger pie and using the equitable aspects of bankruptcy and doing the right thing. 

Rachel Ehrlich Albanese:

Now, let’s think about what’s happening in our market today. The Creditor Coalition has talked a lot about sharp-elbowed tactics that investors have used in recent restructurings.

And by recent, I mean over the past several years where creditor on creditor violence has become a theme. What do you expect for 2023? What are we seeing? Do you think it’s going to be more of the same? What do you think is on the horizon?

Stefanie Birbrower Greer:

I think what we generally see as tactics like creditor on creditor violence in the public side are probably going to leak into the private side world as well. I think that we are going to see a lot more of that. We’re also seeing more private debt issued at public companies. So I think a combination of that and a lot of activity on the secondary market is going to lead to more lender on lender violence in both markets. I don’t want to take a view one way or the other because we find ourselves on both sides of that coin. So it’s going to be an interesting one to watch, but I definitely think it will continue.

Rachel Ehrlich Albanese:

That’s a smart way of not pigeonholing yourself into either side, aggressor or target of aggression.

Oksana Lashko:

I agree with Stef because there will constantly be various ways of interpreting debt documentation. And we’ve seen the debt documents evolve depending on what’s coming through the courts, whether it’s the make-whole language or something else. But it’s kind of a progression. You tighten. You fix the language. Then, something else happens. So it’s a continuous, not a loop, but a continuous path.

I think our profession is probably generally defined by sharp-elbowed tactics, which we are going to continue to see more of with the overlay of additional  input from the litigation results of these liability management transactions.

Surbhi Gupta:

And I think that combined with the number of loans that were issued in a very low strict environment back in 2021, you basically built a pipeline of loans with very open-ended structures. So I think for better or for worse, there’s going to be more activity.

Rachel Ehrlich Albanese:

And what about liquidity? That’s a good segue into our next topic, which is the pressing macroeconomic issues of today. I think we can all agree that there is far less liquidity in the market today than there was two years ago. What else are you seeing in terms of macroeconomic factors that are impacting companies?

Rachel Strickland:

One of the difficult things seems to be that the cycles change so quickly that the supply chain is always out of sync. You saw over COVID, you couldn’t find and source enough cars, new and used, which was both the results of the chip shortage and also the fact that people’s behaviors and patterns were unexpectedly changing.

So then, everyone bulked up and changed their model to be able to meet that demand. And now, there’s far too much. And you’re reading that companies like Carvana are now in a trough where six months ago, they were printing money. And I think in a lot of different types of industries, the rapidly changing demand is making it very difficult for companies to anticipate what they’re going to need, order it, produce it, supply it, and then not have the cycle pass them by.

Cindy Chen Delano:

I think one of the other aspects here is that in addition to the increase in private debt issues that we’ve seen over since 2008 in terms of supply. You’ve also seen leverage ratios creep up tremendously. And, against the backdrop of inflationary pressure and supply shocks, we’re also seeing the impact associated with interest rates rising particularly with smaller players and folks that can’t cut costs fast enough to achieve the cost structure that makes sense given where the debt structures are at and where the debt servicing needs are.

We’re seeing a lot of it play out in different industries and seeing it in the mom and pops, the smaller ones. Retail is always hit hard, service industries, restaurants, the same usual targets that are the ones that can’t bear the cost of rising rates.

Surbhi Gupta:

I agree. Smaller companies on the margin are going to be hurt with rising inflation and interest rates.

They just have less liquidity to buffer against all these different factors. 

Stefanie Birbrower Greer:

Yeah. I would echo that. It seems like otherwise healthy companies that just have too much leverage because of their floating rate debt and the increase in the interest rates are going rather quickly towards a distressed situation. And we see a lot of that in the middle market.

Surbhi Gupta:

And I would say it’s interesting this time around where in COVID, you could focus on certain sectors that were harder than others like retail for instance. I think this time around, every sector is being hit in some way, shape or form. Telecom, for instance, which has historically benefited from very lofty evaluations, now, you look at where they are in the cycle will go through another round of restructurings.

I think there’s wage inflation. You look at healthcare. Reimbursement rates are lagging for inflation. I think every sector is plagued with different issues. So it’s going to be an interesting environment where I think we’re going to be busy for some time.

Oksana Lashko:

Yes. And I would also add, Surbhi, to your point, when I think about the Fed tightening, and they’ve been aggressive to date, there’s always a lagging effect. So even though they might be 

 non-committal going forward, the fact of the matter is they have been so aggressive to date that regardless of what they’re going to do going forward, a recession might be already baked in.

And then it’s a question of the magnitude, how long, 12 or 18 months? In my mind, the issuers and borrowers who have the cash flows to get past 2025 may be fine but everyone else in between is going to need to do restructuring transactions to weather the storm unless you have that liquidity to take you through ’23 and ’24.

Rachel Ehrlich Albanese:

Building on that, how do you have the conversations with your clients about getting them interested in being proactive in restructuring or getting involved in a restructuring in light of these issues? 

Rachel Strickland:

On the creditor side, that’s pretty easy. On the company side, it’s incredibly difficult because hope springs eternal. But on the creditor side, particularly where there is a concern that debt is going to trade into unfriendly hands or you’re in a large position that is still the minority people want to get involved earlier and earlier to understand the risks of creditor on creditor violence and propose proactive transactions that help the company before an aggressor comes in and does it in a way that’s more onerous and hurts their position.

But on the company side, hardly anyone pitches a company with a chapter 11 strategy. It’s always “liability management†which, five years ago, nobody used that phrase. And today, nobody knows what it means. I think it means we don’t want to scare you by saying chapter 11, even though everyone in the market thinks that’s what you need.

Rachel Ehrlich Albanese:

Kind of like “strategic alternativesâ€.

Surbhi Gupta:

I think  the other thing we’re seeing, which will bring sponsors to the table maybe a little bit earlier than just playing out the option on the equity, to Rachel’s point, is, since the financial crisis, sponsors have not had significant workouts in their portfolios. It’s been one-off situations.

But I think this time around, they’ll be dealing with three, four, five multiple portfolio companies. And I think we’ll have to make the decision, which ones do you support? I think there will be a need to be a little bit more proactive if only because you have to figure out where you’re going to deploy the capital.

Rachel Ehrlich Albanese:

And the capital is more limited.

Oksana Lashko:

I agree. Rachel Albanese, as you always say, “You’d better get there early.” And then to quote someone else, “If you’re not at the table, you are on the menu.” So I think it’s important to impress on people that there are more opportunities the earlier you get involved. But Rachel Strickland, I completely agree with you on the company side. It’s a slightly different angle that you are approaching it from because it’s a certainly different audience too.

Stefanie Birbrower Greer:

I was going to say it also just ties into what we’re seeing from a strategic perspective. Financial advisors and lawyers are coming to us way earlier than they had in the past. I mean some of that has to do with law firms having analysts and other resources that they didn’t have when I first started doing this 20 years ago. But some of it is also just we are hearing from firms and groups are getting organized very, very early, sometimes even before it’s on our radar. And we’re certainly a very proactive institution when it comes to that kind of thing.

Cindy Chen Delano:

I think the watch list for larger situations, you get them very early. But I think the smaller situation, so for us, we typically are looking at lower middle market, middle market opportunities where that level of expertise and that level of sophistication is lacking.

And oftentimes, because of the last nature of cov-lite loans, you’re not getting to the table until you’re missing payroll in a couple of weeks which I think there is a sort of divergence in terms of earlier for what I consider large scale situations, large cap situations versus the more off-the-radar folks who are still very much looking at crash landing. So unfortunately in those situations without the runway, without the liquidity, and without a sponsor deal and a real pathway, you’re looking at value destructive liquidations.

Rachel Ehrlich Albanese:

That’s a good point. You mentioned watch lists, Cindy. They are far more common on the legal side than they used to be, as well as the investor side now. DLA has one. I’m sure many firms have one. We try to communicate actively with our clients and contacts about the names that we’re tracking, which we hope that people find helpful. For you, Cindy and Stef, thinking about words of wisdom for your outside counsel, what do you find helpful? And conversely, what do you find irritating or what’s a pet peeve that you see that lawyers do?

Cindy Chen Delano:

When I have folks working on deals with me, I love it when they take a step back and say, “Well, what are your objectives,” rather than, “Well, we’ve got to file this paper. We’ve got to do this.” I would say the criticism would simply be, you just come in, and you say, ” I’m not going to give you a viewpoint. Here’s the law. Let me recite a bunch of what the standards are,” which is not helpful. 

Rachel Ehrlich Albanese:

That’s great advice. Thank you. What about you, Stef?

Stefanie Birbrower Greer:

I think there are a couple of things. And this really speaks to what Cindy was saying, is to really get to know your clients and what’s important to them. And what do their institutions want? What are the hot button issues for their institution helping to issue spot on those?

I think one of the challenges we see is if you’re in a big note holder group or a big group of lenders, depending on what side of the house I’m working for, making sure that the counsel gets to know each member of that group. So if you’re doing a transaction, each member of that group may have different considerations. We may have 40 Act considerations if we’re on the public side. We may have reputational considerations.

We might have all kinds of other policy considerations that are important to us. And so, I think the best practice for counsel is to take that extra time to get to know who’s in the group and what the special issues are for them. Another thing which Rachel alluded to is that, oftentimes, we’ll see pitches from lawyers who aren’t particularly prepared because they just know they got this.

I like nothing better than when someone starts a pitch with… Before we get started, is there anything that you want us to address in particular? I love that.

It’s a recognition that every client is different and every situation is different. Some of the other things are pretty basic, being responsive, not talking to me, like I don’t know what I’m talking about and that I haven’t been doing this for 20 years. You’ll be amazed how many times that one happens. I’ve had much mansplaining the Bankruptcy Code and things like that. But take the time to look your clients up and respect where they’re coming from. 

Rachel Ehrlich Albanese:

I think we can all identify with that. And thank you for that segue to the next topic, which is handling bullies and mansplainers in the professional context. 

Rachel Strickland:

I think the thing that is different about my interactions professionally with difficult people is grappling with a double standard. If you state something definitively and assertively, you’re more likely as a female professional to be heard through a lens of aggression or bitchiness as opposed to assertive, knowledgeable, confident. And the double standard is something that, for some people, not for everyone, is alive and well. I have very rarely been on a Zoom where I have heard anyone comment on the appearance of a man on the Zoom. That is the kind of thing that happens to me pretty regularly, both with very well-intentioned people and people who really just aren’t thinking about it. But it is a component of my presentation and my practice and how I’m viewed as opposed to my male counterparts where no one would think about commenting about what they’re wearing or whether they look tired or something of that nature.

So for me, it’s not bullying or mansplaining. It’s recognizing that female practitioners are viewed through a different lens by a certain subset of the population. And that even in 2023, we have ways to go.

Rachel Ehrlich Albanese:

Yeah. It’s a fair point. It’s something that I think people are making progress on. But what are some tips that people can do to be aware of, to identify bullying or mansplaining in the industry?

Oksana Lashko:

I think what happens to some people is that they don’t even know that they’re doing it. And so, it’s how do you explain to them, “wait a second, this is what you’re doingâ€. I’ve never been in a situation where I had to do it.

But you almost have to put the person on the spot because if it’s intentional, that’s a whole different story. But when people are doing it because they’re not even realizing it’s happening and it could be a man or a woman, then it’s just like anything else wherecommunication is the key and just bringing that to the person’s attention. And I realize there could be all kinds of dynamics here depending on who that is and what the hierarchy is. So that’s a difficult gray area of how you actually do it without feeling like, “Oh, you can’t say something in response.”

Cindy Chen Delano:

I will say that a recent experience really highlighted why it’s still happening and what clients like myself can do about it. I had a situation where there was a male partner who began to mansplain the elements of bankruptcy to a female partner in front of me, as the client. I found it very funny because half the stuff that he was saying were generalized terms. And two, having done it for almost 20 years, it’s kind of silly when someone tries to tell you how bankruptcy works .

And so, what I did afterwards, and I think it goes to the client aspect, which is I really like substance, I don’t like bullshit. I don’t like a lot of the gloss. We are in a world where people are really smart, we demand the best and you have to do the work. If you don’t do the work, it is glaringly obvious. And so, this guy wasn’t doing the work. He was mansplaining. But what I did was I just fired him on the spot. I was like, “Let me explain something to you. I’m the check here. It’s my money, and my money at risk. It’s my capital at risk. You’re off my case and I never want to see you on another one of my deals.” 

Stefanie Birbrower Greer:

I have a very similar perspective, and I do exactly the same thing. We had a big deal, a lot of people in a room and this one partner kept talking over this woman. So afterwards, I said, “Off my deal. No. Thank you. You need to let her speak.” And I think it is part of our responsibility as the client to promote women and to look out for things like that. I think it’s all of our responsibility as a community as well.

And so, I do the same thing and it is very important to me to have women on my deals. It is very important to me to have diversity on my deals. It is very important to me to have people treated with respect. And if I don’t see that, then, I have no hesitation in letting somebody go on the spot and taking them off my deal. And if it makes them look bad, great. Maybe, they’ll learn something for the next one.

Cindy Chen Delano:

This point is important because I get the response back on putting women on deals. They say, “Isn’t that just filling a quota?” And I think of it this way. It’s always about merit. And mathematically, if women can survive this alpha environment, I’m always going to over-select for survivorship bias. Mathematically, they’re going to be more substantive. And that’s how I see it. When I think about it, why wouldn’t I over-select over performance? Isn’t that what I’m supposed to do, drive performance for my investors? That’s alpha for you.

Rachel Ehrlich Albanese:

Speaking of performance, what are some traits of successful practitioners or investors? Cindy mentioned reacting objectively to a situation, not allowing the atmospherics to distract you from the point that you’re trying to make. Does anyone else have any thoughts on this topic?

Rachel Strickland:

The clients that I see that are the most successful investors are not following the herd. They know all of the details of the investment. They’ve done their homework, they understand what makes an investment succeed or fail. They understand the tax implications and things that are the less sexy aspects of an investment. And they come to us incredibly well informed already with very specific questions. As soon as it’s a group deal, you can immediately tell who’s in it because their buddy is in it. And those people don’t do as well.

Surbhi Gupta:

On the practitioner side, what I’ve learned over the years is that there are a lot of people in our world, just given the personalities, that will talk past each other, talk over each other. I think some of the ones that have done really well are the ones that are good observers, and they listen.

I think that’s something that I’ve tried to internalize because it’s easy, especially with the pace of what we do to get wrapped up in a situation. You’re reacting real time to a lot of moving pieces. And I think it’s important.  I have to try to remind myself of this every time just pause, listen, think about it and be a little bit more deliberate in the way I communicate. So I think that’s something I’ve learned over the years.

Oksana Lashko: 

And Surbhi, I think to this point too, it’s appreciating the art of thoughtful disagreement with whoever you’re dealing with because, at the end of the day, that’s how you kind of get to the right place, like you said, it’s about observing, listening and also understanding each other’s view. And you may not agree. But there’s got to be that middle ground you could get to that delivers results for both sides.

I would say the other thing is just knowing how to deal with setbacks quickly. Being very adaptable because we’re constantly in evolving situations where facts change quickly. The group dynamic changes quickly. So adjusting the course and crafting an elegant solution to very complex problems depending on what’s going on could make a difference between closing a deal and things falling apart.

Cindy Chen Delano:

Yeah. And I think as an investor because things are going to go wrong having thick skin throughout all of it, that’s something that makes you incredibly successful. And it’s a matter of they’re going to veer off the game plan, the investment thesis. You have to do the underwriting. I think, Surbhi, to your point about getting past the den of noise and figuring out, “Well, what is it that is driving value here? What is it that is working? What is it that isn’t?”

And also, re-underwriting when it isn’t and acknowledging that you can’t have a one-way view, that it’s absolutely that way when things aren’t, when facts and circumstances are unraveling in a way that’s different from your underlying thesis. And I think to Rachel’s point, you have to be comfortable with not feeling FOMO and the concerns. I mean at the end of the day, I’m always reminded you shouldn’t be doing everything that everyone else is. If you’re doing everything that anyone else is doing, you’re not going to make money. You’re not going to deliver extraordinary results doing what is ordinary and what everyone else is doing. So we have to be comfortable with being different. 

Rachel Ehrlich Albanese:

I think all of you are comfortable with being extraordinary. For our last question, let’s talk about who is your role model and how has he or she helped you in your career?

Rachel Strickland:

For me, one of my role models is Agnes Tang, who’s a banker at Ducera. The lawyers, the female restructuring partners often view ourselves as rare. But the bankers are even more rare. And she is someone who, without ego, without fanfare, really manages to be the smartest person in the room. She doesn’t speak to hear the sound of her own voice. She adds meaningful contributions and gets successes just on the strength of her intellect, her hard work, her ability to work with people. And universally, she’s well liked and well respected because she learns a lot about her counterparts and figures out a way to get to yes and find a constructive solution.

Stefanie Birbrower Greer:

I think this was a more thought-provoking question than you may have intended, because when I went to think about because I was focusing on a female role model. I was like, “I really don’t have one.” And I think that says a lot. And from where I came from, I had a lot of important and influential people. But I wouldn’t say any role model because a lot of the people, I didn’t have that ability to really relate to what they were doing. I will say the person that had the most influence on how I practice law was Barry Seidel, who I know, Rachel, you know as well. And Barry taught me how to be a commercial lawyer, how to think about the business, how to really think about what the clients want.

And I think without him, I would not have had the ability to really learn as much as I did about how to understand what the client’s needs are, what they’re looking for and how to really put yourself in their shoes. And now that I am the client, I always hear his voice in what I say on a regular basis. 

Surbhi Gupta:

I’d say quickly for me, as the lone female analyst growing up on the investment banking side, 20 years ago, my role models, mentors were largely the men in the group. And what I learned very quickly and what was really impressed upon me was that it doesn’t matter that you’re the lone female. I was actually never consciously aware of it unless I went into a boardroom, and I was the only female present. It was very much about meritocracy and really putting the work in… We have a mantra here that says, “The best marketing is good execution.” And so doing the work leads to more opportunities, leads to more networking, leads to other opportunities and hopefully presumably upward mobility.

And I think that’s been a pretty critical element of what I try to impart as we try to recruit more female analysts and members of more diverse backgrounds.

Rachel Ehrlich Albanese:

That’s great. Okay, so I think that brings us to the end. I really appreciate all of your time today. Thank you so much for spending the time this morning.