Millstein’s Abrams Juggles TXU to Puerto Rico as Workouts Scarce

On a recent Monday, restructuring banker Elizabeth Abrams was on a conference call negotiating for hedge fund creditors ahead of the $50 billion bankruptcy of Energy Future Holdings Corp. She happened to be sitting in a hotel conference room in San Juan, Puerto Rico -- where she’s advising the government on addressing $73 billion in debt.

Abrams, a 33-year-old managing director at Millstein & Co., is one of just a handful of female investment bankers who advise on restructuring -- and arguably one of the busiest at a time when flush credit markets have helped keep most borrowers out of trouble.

Her current assignments are the two biggest going. Energy Future, where she’s advising senior creditors including Oaktree Capital Group LLC, is among the biggest corporate bankruptcies, and Puerto Rico is the most indebted junk-rated municipal borrower.

“Energy Future and Puerto Rico are so different, it can be a bit of a juggling act,” she said, just days after helping on a deal that allowed Energy Future to file bankruptcy with a preliminary plan. “But that’s really what keeps it fun.”

Abrams grew up in Denver with her parents and two sisters, moving east for the University of Pennsylvania’s management and technology program. Graduating with dual degrees in finance and engineering, she considered careers in finance, consulting and technology before joining Miller Buckfire & Co.’s restructuring advisory group in New York.

“Restructuring was the perfect fit with my interest in solving problems and my background in finance,” Abrams said. “It is a very appealing mix that suits me.”

Complex Restructurings

Over the next nine years, Abrams worked on progressively larger and more intricate restructurings, advising clients including Mirant Corp.’s creditors, and debtors Calpine Corp. and General Growth Properties Inc. -- considered one of the most successful restructurings ever when it exited bankruptcy in 2010.

“Elizabeth is an up-and-coming super-talented restructuring professional,” said Ronen Bojmel, head of restructuring at Guggenheim Partners LLC, who worked with Abrams at Miller Buckfire on transactions including General Growth. “She’s a professional you definitely want on your side in a restructuring transaction, and not on the other side.”

Along came Jim Millstein, the U.S. Treasury’s financial crisis-era chief restructuring officer, who started his boutique advisory firm two years ago. He recruited Abrams along with about 30 other restructuring and financial bankers and former Treasury officials.

A lawyer-turned-banker who had worked at Lazard Ltd. for a decade, Millstein, 58, oversaw Treasury’s financial industry bailouts, including American International Group Inc.’s rescue under the Troubled Asset Relief Program.

Fannie Mae

Millstein & Co. advised US Airways Group Inc. on its initially rebuffed and ultimately successful merger with bankrupt rival AMR Corp.’s American Airlines, and has developed a restructuring proposal for mortgage giants Fannie Mae and Freddie Mac, which Millstein has called “the unfinished business” of the crisis. That plan has so far gained more traction with hedge funds than with the federal government.

His firm won a coveted assignment representing a group of creditors owed $23 billion by Energy Future, the former TXU Corp. Texas’s biggest power producer was taken private by KKR & Co., TPG Capital, Goldman Sachs Capital Partners and their co-investors in 2007 for $48 billion in the biggest-ever leveraged buyout.

Working with Jim Millstein, Abrams helped negotiate a preliminary deal for her clients to exchange their debt for full ownership of Texas Competitive Electric Holdings, the deregulated half of TXU. Those lenders include Oaktree, Apollo Global Management LLC, Centerbridge Capital Partners LP and Angelo Gordon & Co.

Junk Rating

That transaction represented the single biggest piece of a pre-bankruptcy agreement, hashed out over almost a year, to help expedite the Chapter 11 filed this week.

Amid the TXU negotiations, Millstein & Co. was hired as a financial adviser to Puerto Rico’s Government Development Bank. The commonwealth and its agencies were cut to junk by ratings agencies in February.

Abrams spent much of her time on the Caribbean island in the weeks leading up to a $3.5 billion bond sale in March -- the biggest junk-rated municipal borrowing ever. She continues to travel there regularly, advising municipal and Government Development Bank officials on managing assets and taxes in a shrinking economy.

Governor Alejandro Garcia Padilla this week announced a budget plan that avoids deficit financing in favor of cost cutting.

End Game

Abrams “sees the end game very early, and keeps it foremost in mind,” said Becky Roof, an AlixPartners LLP turnaround consultant, who is currently interim chief financial officer at Eastman Kodak Co. “She’s practical about what the situation is before her, and then making the best of that situation. She’s not wishing it was something different or pretending it’s something else.”

Restructuring advisory demand has slowed in recent years as record low interest rates enable most borrowers to refinance on cheaper terms, pushing back maturities. The default rate among the riskiest corporate borrowers neared record lows before TXU this week doubled the rate, Fitch Ratings said. Business bankruptcy filings dropped 24 percent last year from 2012, the lowest since before the financial crisis, according to the American Bankruptcy Institute.

‘Creative Solutions’

Abrams, who grew up skiing in Denver “spoiled with lots of powder,” discovered the surf beaches of Rincon during her frequent travels to Puerto Rico. She took up running about four years ago, often training in New York City’s Central Park, a short stroll from her Upper West Side apartment.

To unwind from the 12-hour-plus work days and regular weekend toils of a restructuring banker, she participates in half-marathons and says she’s “working up to” competing in a full marathon.

“The issues troubled companies and creditors face tend to be unique and complex,” she said. “I’ve always enjoyed developing creative solutions.”

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