Michel O. Weisz is a shareholder in the law firm Berger Singerman and works out of its Miami office. As a member of the dispute- resolution team, he concentrates his practice in commercial litigation and has represented several prominent luxury yacht manufacturers, including Post, Ocean and Viking.
Prior to joining Florida-based Berger Singerman (www.bergersingerman.com), Weisz, 54, managed his own firm for 21 years. He has represented clients in First Amendment religious freedom claims in federal and appellate courts, and has argued before the Florida Supreme Court, several Florida District Courts of Appeal, the U.S. Courts of Appeal for the Fifth, Seventh and Eleventh Circuits, and has been part of more than 30 published appellate decisions.
His trial practice has encompassed cases in Florida, Illinois, Massachusetts, Michigan, New Jersey, New York, North Carolina, Pennsylvania, Texas and Virginia before state, federal and bankruptcy courts. The issues he has litigated range from constitutional claims involving due process, commerce clause and statutory construction to multimillion-dollar commercial cases involving warranty claims, partnership and business disputes, commercial fraud, class action and commercial real estate matters.
Weisz received a Bachelor of Arts in economics and philosophy from the State University of New York at Stony Brook in 1978, and his Juris Doctorate from the University of Miami in 1981. Weisz is married with two children, two stepchildren and one grandson.
Q: What advice would you give to a company that's in financial trouble?
A: The best advice I can give a company that is either in financial trouble or thinks it may be in financial trouble is to talk to experienced professionals and get help before there is a crisis. There are lots of people who can give good advice, and there's lots of good advice to be had. Restructuring is a specialized area. There are a number of options available to a financially distressed company that acts prudently to address its problems. Working your way out of a distressed situation without cash or a source of liquidity is enormously difficult. Therefore, taking action early is critical to the success of any plan.
The climate for financial problems has changed dramatically in the last couple of years. ... There are so many different people and companies in trouble - legitimately in trouble - not because of things that they have done wrong themselves, but just because of global market conditions that it has become a lot more acceptable to work these problems out without simply pounding on the table and demanding payment. ... I would certainly say most reasonable lenders are much more realistic than they have been in the past, and they're more willing to work with companies who can provide legitimate and realistic options. That's the way I think these problems should be approached now, because the options of stridency can always be brought in later. You can always take the drastic steps if reasonable ones don't work.
Q: At what point should a company consider bankruptcy?
A: Bankruptcy is a powerful tool. However, an actual filing is likely the last option for most companies. A starting point for most distressed situations is to evaluate the alternatives or remedies available to the company and compare those to risks and costs of a bankruptcy. The company can then make an informed decision on how best to navigate a restructuring outside of bankruptcy and whether it is feasible to do so.
Bankruptcy, however popular it is, is still a difficult and uncertain process. In Chapter 11s, which are reorganizations, there are a lot of different creditors that need to be handled and issues that need to be addressed, so there's always some uncertainty with respect to the outcome. I think a bankruptcy like Genmar's is a good case in point. A Chapter 7 bankruptcy case involves the shutdown of the business and the liquidation of the company's assets. That process is run by an independent, court-appointed trustee. There are a number of options available to a company that simply wishes to cease operations and liquidate its assets. As with a reorganization, there are a number of factors management should consider, and getting advice from experienced advisors is essential.
Q: How should a company decide whether to file for Chapter 7 or Chapter 11?
A: It's really a process that you should talk through, and, again, earlier is better. If you come to somebody with your problems earlier and try to work out different scenarios, then you have more options. Waiting until the last minute and leaving yourself no options is not really a good plan to try to survive.
Q: Many have been critical of Genmar Holdings' founder Irwin Jacobs filing for Chapter 11, then changing to a liquidation and stepping down as CEO so he can be one of the potential buyers. Is this more common than people might think?
A: It's probably more common than people might think. It is an available strategy where an owner of the business who doesn't have any personal debt or liability and who has sufficient independent financial resources can use bankruptcy as a way to purchase assets from the company. All such sales are subject to court approval. These sales are usually undertaken through a competitive sale process, like an auction. The sales result in the buyer taking title to the assets free and clear of all prior liens and claims of creditors. It's perfectly legal. It's not easy to do because there are lots of pitfalls, and there are lots of things that can happen to derail your plan, if that was Mr. Jacobs' plan in the beginning. ... There's no assurance that a plan like that will work. There's another sailboat company that went through a similar process, and I don't remember their name, but it is something that can be planned, but it's not the easiest of plans to implement.
Q: If you're an unsecured creditor in a bankruptcy case, what can you expect in terms of payment as a company emerges from bankruptcy?
A: Realistically, as an unsecured creditor in a reorganization, I would be hard-pressed to predict, especially in the boatbuilding industry, that you would get more than maybe 10 or 15 cents on the dollar in a reorganization. In a liquidation, you probably would get nothing.
Q: What legal recourse do unsecured creditors have once a company files for bankruptcy?
A: If it's a legitimate bankruptcy and done properly and everything is done according to the appropriate rules of bankruptcy, very little. If there is fraud or waste or mismanagement or breach of fiduciary duty or diversion of assets to insiders or any kind of fraudulent conduct, you would have recourse against the people who either stole or wasted or misapplied company assets. But short of that, if it's a legitimate bankruptcy filing, the rules are there to allow companies to either restructure or liquidate, and you wouldn't really have much recourse beyond that.
Q: At IBEX 2009, you gave a talk titled "Dealer Economics: How to Survive." Can you summarize some of the advice you gave?
A: My advice was to take a very realistic view of your business model, whether what you do is something that, going forward, will enable you to make a living. That means do you have the right products to sell? Are you properly capitalized? Do you have debt that you can manage? Do you have resources to hang in there until things get better? That [is] part one. Part two is if you've answered "no" to any of the above, it's time to start thinking about a Plan B and a Plan C.
Q: We saw a lot of dealer failures in 2009. What can we expect for 2010?
A: It's hard to say. From my own vantage point, I think demand will probably be flat for the next year or two. Obviously, I think lower price-point products will likely recover faster than higher price-point products. I think marinas with full-service yards - meaning they do repair, sell parts, do maintenance and storage - will probably be OK. Especially in South Florida, where there was a shortage of marina space and berthing space and there are still enough boaters and people who own boats who are willing to keep and maintain what they have. I don't know for the rest of the country where there may not have been as much of a shortage of marina space as there was in South Florida. But I think full-service facilities will probably be OK and be able to service the existing boat owners.
I think brokerage is going to be so-so. Ironically, some of the brokerage that's surviving is because there have been so many repossessed boats that are being essentially serviced by lenders who are paying to berth these boats at brokerages. Brokerages who are trying to sell off this inventory have a little bit of a free pass with that income. [With] new-boat sales, I think we're in the worst time. I think it will be a slow recovery.
Q: You have several large yacht manufacturers as clients. How is this sector doing?
A: Well, it's probably the hardest-hit sector. I think the clients that I have are doing what they need to do in order to transition through this period and come out on the other side with a company that will have the ability to meet the market needs as people start buying boats again. [The market for this niche] will be a lot smaller than it was. I don't think there are going to be that many Rolex buyers for boats, meaning people are not going to buy boats anymore, especially large boats, which they simply dock and tell people they own. I think we are regressing to the point where people who buy these products actually use them and want them, and that's a much smaller segment than the group that had been buying these boats for the last eight to 10 years.
I do believe people love boating. I do believe that there are people who live for boating, and I think that those people will always be there to buy boats, and those that can afford to buy larger boats will buy larger boats.
Q: What do you see as the future of the boating industry?
A: I think that the boating industry, for the foreseeable future, is going to be populated on all ends, from manufacturing to sale to consumption, by people who actually love boating.
This article originally appeared in the February 2010 issue.