“By three methods we may learn wisdom: First, by reflection, which is noblest; Second, by imitation, which is easiest; and third by experience, which is the bitterest”

 – Confucius


  • Pacific Sunwear Exits Bankruptcy on Firmer Ground: (Retail Dive). Mall-based retailer Pacific Sunwear has exited a chapter 11 bankruptcy; having successfully used the filing as a springboard to a reorganization.  For companies operating in most industries, this would hardly be noteworthy, but in recent years bankruptcy filings by retailers have seemed to lead inexorably to liquidations, as creditors panicked and management teams struggled to define a profitable core while fighting the clock (having just seven months to accept or reject leases).  Given this background, Pacific Sunwear’s emergence, with backing from private equity firm Golden Gate Capital, illustrates that risk capital has not abandoned mall-based retailers, and that companies with a reason to exist, even those operating in troubled sectors, will continue to attract support.


  • Adaptation to Disruptive Change (AlixPartners). As the pace of technological and business model disruption intensifies, company boards, CEOs, leadership teams, and other key stakeholders must increasingly focus on developing an organizational capacity for adaptation.  By first identifying the phases of disruption, and then mapping leadership action steps, an effective and versatile playbook can be developed for companies regardless of the particular shape of the disruption facing their industry.


  • The Story Behind San Bernardino’s Long Bankruptcy (Governing). The city of San Bernardino, California, has been mired in a chapter 9 bankruptcy for four years.  While larger municipal bankruptcies (Stockton, CA and Detroit, MI, in particular) were largely attributable to pension and healthcare costs, the catalyst for San Bernardino’s bankruptcy could fairly be said to be the city’s dysfunctional governance model, which includes a hybrid of the mayor / council and city manager models, resulting in a diffusion of authority.  This diffuse authority, combined with considerable turnover in the roles of city manager, police chief, finance director, and public works director, led to a situation in costs gradually outpaced revenues.  Meanwhile, municipal leadership did not have a clear understanding of the severity of their financial situation until there was a danger of not making payroll.  San Bernardino is now seeking to amend its municipal charter in order to ensure more effective leadership going forward.


  • Navistar Steps Off The Bankruptcy Brink With Volkswagen Partnership (Forbes). Spending billions of dollars on a diesel technology that critics termed “the diesel version of Betamax” is an effective way to lose the support of investors, and as recently as 2012 Navistar seemed to be on the verge of collapse in the wake of the Environmental Protection Agency’s rejection of its propriety diesel technology.  The outlook for the company is now considerably brighter, with the announcement that Volkswagen would inject $256 million for a 16.6% stake in the company, as well as enter into a joint venture purchasing agreement that Navistar management believes will result in over $500 million in savings over the next five years.


  • Hanjin Wins U.S. Bankruptcy Shield, Allowing Cargo Off Ships (Bloomberg). Troubled Korean shipping company Hanjin Shipping Co., was granted protection under chapter 15 of the U.S. bankruptcy code on Friday.  The company’s distress has stranded $14 billion of goods on its container ships, threatening to disrupt the supply chains of companies across the globe.  Hanjin has been in talks with primary lender Korea Development Bank and shareholder Korean Air Lines Co., for additional support, but in the context of a troubled global shipping market facing overcapacity, market watchers are questioning what if any assets of the company might be desirable.

About Abraxas Group

Abraxas Group is a boutique advisory firm focused on providing transformational leadership to middle market companies.  Founding Partner David Johnson has served as advisor or interim manager on over $5 Billion of distressed transactions, and is a recognized expert on the topics of value creation, change management, performance improvement, turnaround, and restructuring.  David Johnson can be contacted at david@abraxasgp.com or 312-505-7238.