Office of Thrift Supervision

Gordian Group advised the OTS in connection with the restructurings of both CalFed and GLENFED, which were two large, failing savings and loan institutions. The OTS believed that the government could save significant taxpayer resources if the institutions were restructured commercially, rather than seized by the RTC. As a large contingent creditor, the government was seeking to maximize the values associated with the continuation of these entities as going concerns.

The OTS engaged Gordian Group to provide advice with respect to implementation of its policy and economic objectives through negotiations in a commercial context. Frequently, Gordian Group needed to respond to government requests for information and recommendations on an immediate basis, given (x) the tight time frames involved and (y) the difficult dynamics associated with a multiple-sided negotiation involving the OTS, the institutions, existing securityholders and new money participants.

Specific topics on which Gordian Group advised included (i) structure of exchange offers of newly-issued equity securities for outstanding debt obligations, (ii) negotiation with bondholder groups, (iii) development and analysis of financial and legal alternatives available to the government and (iv) assessment of the institutions' ability to raise capital. Gordian Group was also asked to make recommendations regarding the government's decisions as to continuation of capital adequacy waivers. Without such forbearance, these institutions would likely not have had time to reorganize.

In the CalFed and GLENFED matters, the institutions were successfully recapitalized through external capital infusions and compromise of pre-existing debt and other claims. The intangible assets associated with ongoing lending operations were preserved, and the taxpayer was relieved of the significant potential expense that would have ensued as a result of the alternative to these restructurings - seizure.