“You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”

― R. Buckminster Fuller

By David Johnson | @TurnaroundDavid

Puerto Rico

  • Why Congress Should Let Puerto Rico Declare Bankruptcy (The New Yorker): With annual debt service costs having reached $2.8 billion, and an economy mired in a nine-year recession, it is not news that Puerto Rico has financial problems.  However, the announcement by Governor Alejandro Padilla that the island commonwealth’s debt is “not payable”, and that a restructuring will be necessary, raises questions of just what shape a restructuring might take, given commonwealth’s current inability to take advantage of chapter 9 of the bankruptcy code.
  • The Epic Fall of Guess Jeans (Forbes): Family-owned apparel company Guess, Inc. has seen better days.  After an incredible 15-year run from its 1981 founding to a 1996 IPO, leadership turmoil and over-expansion have  bedeviled the company, leading many outsiders to proclaim the need for new leadership to move the company forward.
  • Shale Boom Shows Strength as Rigs Gain With Oil Under $60 (Bloomberg): In a startling illustration of the flexibility of an industry that has shown extreme ingenuity, shale drillers have revamped their cost structures, restructured their debt facilities, and resumed drilling, sooner than experts imagined possible.  Experts believe that shale drillers have successfully lowered their break-even points by $15-20 a barrel.
  • The IMF has made an obvious point about Greece’s huge debt (Quartz): A major creditor of struggling Greece has come out with a study acknowledging the obvious: a massive restructuring, including forgiveness of nearly $60 billion, will be necessary for the country to return to fiscal health.
  • Retail’s Walking Dead (The Robin Report): A number of failed apparel retailers have returned to the market in new form, supported by investor funds and the hope that a revamped business model can serve to extract value from existing brand names.  While some of these endeavors will see success, it seems certain that a number of these investments will be failures.