Marina Zosya

You Are the Most Knowledgeable CFO EVER… How sad!

Let me explain to the handful of readers who actually noticed my absence from these virtual pages that this is what it takes for a small business to close a $20 million three-year capital financing deal with a global bank (such as Citi): You basically have to put your entire fucking life on hold.

That is, of course, if you are someone like me - a CFO who rolls up her sleeves and plunges herself into the nitty-gritty of negotiating every single definition, every single term, every single condition, and every single covenant of the Term Sheet and then the Credit Agreement in a pursuit of getting the best deal possible; someone who has the grasp of a fox terrier, who can shove pushy bankers and lawyers right back where they belong, who is not afraid of the ambiguous formulations, obscure terminology, and legal jargon.

But that's it, isn't it? In order to be able to get exactly what you need out of any deal that involves money-holders and their supporting infrastructures you need to know your business better than anyone else and their business better than they do. You need to speak their language and your comprehension of it must be more nuanced than theirs. It's nothing short of a battle for the business survival, and if you don't prevail you and those who rely on you lose. It's like in Game of Thrones: Tyrion's Champion, Prince Oberyn, mortally forfeits the battle to The Mountain, and that spells really bad news for Tywin Lannister's youngest son.

The problem is that most corporate financial executives don't see it that way: just like many other salaried employees, they don't care to know anything beyond bare necessities and they don't feel fiscally responsible for their companies' wellbeing. Hence, the low levels of professional awareness and circumvention of sophisticated issues is observed in most CFOs and Controllers today. And it ends up costing employers a pretty penny in unnecessary legal, accounting, and consulting fees.

Hey, you don't have to take my word for it. By the way, all numbers below are real and quotes are taken verbatim from various communications.

Let's see. When the bankers presented us with the Term Sheet back in March, I did not get either our corporate attorneys nor independent CPAs involved at all. The bank's credit risk group and I spent two months going back and force, until I got the document into an acceptable shape (estimated savings on legal and financial consulting fees - $50K). As a part of the Term Sheet, I insisted on the bank's due diligence and legal expenses (changeable to us) being capped (estimated savings – $35K).

The Citibank people, stuffed to the gills with data and reports I've provided to them during this process, kept telling the other members of my Board of Directors things like, "Oh, that Marina, she is amazing! She is the best! She is so tough!" They would write emails like: "Thanks, Marina. This is very helpful, plus your expertise is tremendous!" As if I was performing some magic tricks – I was just doing my job… thoroughly. When the Term Sheet was signed and sent to the bank my future relationship manager asked me in confidence (referring to the owners), "Do they understand that the only reason they are getting this deal is you?" Hmm…

After successful due diligence and final approvals from the bank's Credit Committee, the Agreement package (186 pages of documents) was emailed to me by Citi's lawyers. The lead attorney asked me in the cover email to provide him with the contact info of my legal representation, so that lawyers could start dealing with each other directly. I was like, "Fuck, no!"

You see, as soon as you officially appoint a lawyer as your representative, the other side is not allowed to discuss anything directly with you. Here's what happens: Let's say the bankers propose an additional clause or some adjustment; they call their lawyer; their lawyer contacts my lawyer; my lawyer, who doesn't know much about the intricacies of my business and is not allowed to make any decisions on his own, delivers the request to me. And then in the opposite direction: I formulate my response; now I have to explain to my lawyer all details in a digestible format so that he can deliver them to his legal counterpart; the latter than communicates them to the bank.

Are you counting the connections? We are talking quadruple billable hours on both sides! And it's like that for every single issue and point. I'm not doing that! I say, "Excuse me, sir, but for now you will be talking directly to me – at least until all business and financial kinks of these documents are ironed out. Okay?"

Professionally lawyers are just as obnoxious as doctors – they think that their diplomas make them better than other people (yet, they discuss economic matters with me as if they too had a PhD in the subject and an MBA). So, at first the bank's attorney bristles, but, as I start beating him up on one point after another, he gets quite tamed and develops respect. He actually says, "I hold you in high esteem," which is very nice, because the majority of these assholes don't ever want to admit that you are their equal (estimated legal fees savings – $30K).

Finally, I was satisfied with the contract and introduced my attorney into the mix. He literally had ten comments on the legalese and after that the process turned into technical preparation of documents between the two legal firms.

Total closing fees savings upon signing: $115,000.

I am his client, so my attorney feels free to make a frank comment: "I have to say, you are the most knowledgeable CFO I've ever met, and I'm not even talking about your understanding of the contracts. It's everything. Most of the time I talk to your peers and they are like… I'm sorry… They don't know shit."

On the day the deal was closed one of the shareholders wrote to me: "…Your performance transcended what could reasonably have been expected from a typical CFO."

Well, that' nice, isn't it? Except that all these praise-singers probably think that I'm flattered by their compliments (as if I live for their approval). But I am embarrassed: I keep thinking how all those ignorant CFOs and Controllers taint the image of my profession. And everybody thinks that you are just like the rest of them until you prove otherwise.

People say to me, "What difference did it make for you personally? Did you get a deal-completion bonus?" And some ask, "Why try so hard? You don't even care about 'business' things as much as you do about art!"

They are absolutely correct: Yes, some music passage, or a scene in a play, or an image, or a hand-written poem will make me cry; yet, most people with whom I work can't even imagine tears in my eyes. And no, I didn't get an extra bonus. And I don't consider this my personal vocation. But the circumstances of my life made this into my paying occupation and I have to measure myself by my own standards: as long as I must waste a huge chunk of my life on making other people rich, I'd better do it to the best of my abilities. Why other CFOs don't feel like that? Well, everyone probably has her own story, but mostly it's that plunging-quality-of-everything effect I like to write about so much. It's pervasive.

RIP Robin Williams… And a Few Numbers

Unfathomable! Dead? How can somebody so alive be dead? Is it possible that a person who couldn’t remain seated in a chair for more than a minute at a time during talk show appearances stays so still now? Who can imagine this 500-miles-per-hour talking train to be completely silent?

Yet, I understand: The mud at the bottom of the depression well must be too thick to move and no scream can reach the surface. There is only unbearable pain. I am terrified imagining the emotional sufferings that led to this. But it’s hard to believe – he made so many people happy! Steven Spielberg kept his number on speed dial during filming of Schindler’s List – he would put him on speakerphone, so that he could cheer up the cast and crew with his endless jokes and impersonations. Amazingly, his dramatic gifts were equal to his comedic talents. At the end, none of it mattered – a good lesson to the vast majority of people who believe that popularity is the ultimate end game.

And now he is gone, leaving behind 102 acting jobs that drew $5.2 billion back into the entertainment industry; $50 million raised through Comedy Relief; endless hours of improvisational material that simply couldn’t fit into his movies and TV shows (16 hours for Aladdin alone); #13 rank on Comedy Central’s list of “100 Greatest Stand-ups of All Time”; a speed of 15 impressions under a minute; 64 awards and nominations; 3 wives and 3 children…

Everyone’s favorite Genie, gay impresario, cross-dressing housekeeper, Popeye, war-time disc jockey, and alien; a literature teacher and a psychiatrist we wished we met; the best player of the most dangerous game that can eat you alive – I hope he is at peace now. Maybe now he can be this happy all the time:

Watch: Robin Williams makes Koko the gorilla smile

Video Quote of the Week: What Would You Do for Your Art, John Waters?

The Frustrated CFO’s preface:

I’ve been a John Water’s admirer for… hell, I don’t want to count the years, because the man is timeless and forever, just like the ugly qualities of the human species he saw, recognized, and had the unique brilliance to shove into our faces in the hyperbolized, grotesque fashion comparable to Goya’s etchings. I always think of him as a kindred spirit just as frustrated with his surroundings as I am. Anyway, the first time I watched Divine in Pink Flamingos, sentencing Marbles to death for “first degree stupidity” and “assholism,” I was captivated. And it’s not just about the talent for me. His unabashed bravery and complete disregard for the established “civil” canons give me chills! I’m not going to lie – I wish I could be that courageous and free. And just as I thought that Mr. Waters, now 66, could not possibly enhance my appreciation of him any further, he went and hitchhiked across the country with a single purpose of writing a book about his experience doing it. Wow! Below is New York Time’s video of him talking about it. Enjoy and aspire!

What the video here: John Waters Hitchhiking Across the U.S.

Quote of the Week: Red Reddington and The Frustrated CFO Concur in Defining the Key to Success

The Frustrated CFO's preface:

I'm in the dental office, standing by the payment-processing counter with the endodontist. We are waiting for one of the claim processors to estimate the out-of-pocket costs that will arise from the doctor's suggested course of action. It's one of those full-service dental groups where they have all specialists, either on staff or itinerant. This requires a matching number of assistants, plus administration – in other words, there are a lot of people around. I'm here only for the second time. Yet, I notice every person I've already met, "Hi, Vivien, how are you?" "Hello, Christa." (None of them wear name-tags or anything like that).

The doctor asks, "How come you know everyone?" Well, I don't know "everyone", but he seems like a nice guy, very pleasant, so I have an impulse for a wholehearted answer: "This is what I do. If a person introduces him- or herself, I make an effort to remember the name. Every time. No matter who that person is – customer service representative on the phone, a salesperson in the store, a receptionist in whatever office, your dental assistant, people I meet in business gatherings. If I have a chance, I immediately address that person by name. …And that's how you succeed in life."

Well, my dear readers, "success" is a relative notion, of course – this rule is not going to make you billions, but, I promise you, it will definitely help in whatever your life's endeavors are.

One of the women sitting behind the counter, Hope the Office Manager, chimes in: "But I'm so bad with names!" I just smile at her sweetly. In my head I'm thinking, "And that makes you a terrible administrator."

Literally a couple of days later I'm watching the first season's finale of The Blacklist on demand. Imagine my surprise at the perfectly timed like-mindedness when, about 15 minutes before the episode's end, Red Reddington bursts out the following tirade written for him by the series's writers (John Eisendrath et al.):

"I must say, I'm very good at finding people. I've tracked enemies far and wide. I once found a hedge fund manager hiding in the Amazon… on the banks of the Cuini River. You know what the key to finding your enemies is? Remembering everyone's name. It's critical to my survival. Anyone knows the head of some drag cartel in Columbia; some politician in Paris. But I know their wives, girlfriends, children, their enemies, their friends. I know their favorite bartender, their butcher…"

Rumor Has It… Trouble Is Brewing in Private-Equity World

The other day I had a meeting with some big shots from Citibank's commercial landing. Every single person at the table felt disappointed. On my side of the negotiations, everyone was shocked that the bank came up with some really sneaky changes to the Term Sheet we have originally accepted. Citibank's covert operatives were distressed to realize that their maneuvering didn't work on us and, moreover, we are absolutely ready to walk away from the deal.

Nobody was disgusted more than me, though: I've rejected other lending candidates in Citi's favor based on the conditions of that damn Term Sheet; I've spent so much time and effort making sure that the deal comes to conclusion and closes by June 15th; I've conducted so many detailed discussions with the bank officers; I've plied the Credit Risk Group with tons of information and provided elaborate answers to every single of their drilling questions – dammit, what a waste! I started getting up from the table, determined to say a cold goodbye ("Good day, sirs… I said, 'Good day'," or something like that) and leave everyone in the conference room to their own devices.

But the bank's team leader didn't want to give up. This seasoned warrior (whose bonus depends on the number of deals she closes) quickly swallowed the bitter pill of defeat and started deliberating the possibilities of remedying the unfortunate situation. By way of explaining and excusing their underhanded tactics, she embarked on a tale of pressure and oppression all national banks suffer from the Office of the Controller of the Currency (OCC) that, empowered by the US Treasury's mandate, tightened the regulatory screws on all commercial lenders operating in small and middle markets.

Ring-ding-ding! The government is making it more difficult for small and mid-size businesses to borrow operating funds? Tell me more!

I can only attribute her sudden loquacity to the awkwardness of the impasse we have reached, to the thickness of the room's air that required some sort of easement before our dialogue completely choked. Not only that she went into details of the new pre-lending qualification requirements for private businesses such as lower leverage (i.e. debt/equity) and higher fixed-coverage (EBIT + fixed costs/fixed costs + interest) ratios, but she also divulged some information bankers almost never discuss – she told us about a specific deal just killed by the bank's risk underwriters for the sake of compliance with the government's wishes.

It was the nature of the transaction in question that surprised me at first – a typical leveraged buyout (LBO) of a privately-held manufacturer, with a well-known private equity (PE) firm and a mezzanine lender already in place. Citi was expected to step in as an institutional lender covering 55% of the contractual purchase price. I might've been wrong, since I'm not exposed to M&A on daily basis, but I was under impression that banks are usually hungry for the high-yield rewards of such deals, especially considering the prominence of the PE behind it. The fact that this case was presented to us as an example of insufferable regulatory interference kind of confirmed my suspicion that Citi's bailing out was an unexpected turn of events for the bankers themselves.

So, did they get the explanation from their Risk partners? Yes, they did: The due diligence suggested that the deal had a high probability of a quick turnaround. In other words, it was expected that the PE firm would quickly flip the acquired company's stock for a nice profit leaving the company to deal with the loan repayments. Ok, but isn't that the nature of any private equity transaction, regardless of whether the ownership is sold fast or kept in-house for years? The loan repayments always come out of the company's operational cash flows. The liability is a part of their balance sheet. Hmm…

Anyway, the talkative tactics worked and we all decided to go back to our respective drawing boards instead of walking away from a very promising relationship. Good! But the story of the killed LBO kept gnawing at me.

Ok, on the surface, it may seem that the government is working hard on protecting taxpayers from a possibility of another bailout. But

Citigroup was one of the first bailees to repay the government ($51 billion) with the highest profit on the bailout list (additional $13.5 billion).
As we know, it wasn't the commercial lending, but the sub-prime mortgages and the securitization thereof that was at the core of the financial crisis and the subsequent bailout. That is why the government-sponsored Fannie Mae and Freddie Mac top the bailout chart with $187 billion of the received support between two of them.
Of the top 20 bailout recipients the one with the largest debt still outstanding since 2008 is General Motors (as of 05/29/2014, $11.5 billion is still due)- an automaker, a public company, a NYSE's Blue Chip.

Wait a minute, wait a minute! Private business vs. public company? These Treasury moves have nothing to do with the fiscal protection of the nation. It has to do with the government's continuous prevention of the stock-market crash and massive panic that will follow. Too scared to deal with the long overdue adjustment, it has been doing everything in its power to direct both public and corporate investments into the shares gambling of mythological proportions.

The private businesses and the private equity investors act against this insane agenda by laboring hard under the natural commercial formula of growing capital through realized profits generated by functional enterprises. To undercut these efforts, the proverbial "they" are willing to sabotage private businesses, which hoi poloi knows nothing about, in order to continue ballooning the stock market cancer, so that the general public with their Ameritrade accounts and 401(k) plans invested into "emerging" markets is kept at bay.

Well, I will not fold! I will get that Citi line! As hopeless as it may be in the long run, I take a great satisfaction in the fact that my daily work is essentially a part of the Fiscal Resistance.

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