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Peter gallagher pitchbook Peter gallagher pitchbook Presentation Transcript

  • Content. Driven. Peter Gallagher, June 2010
  • Table of Contents Introduction: - Objective & Core Competencies - What do Investors Want? - What Research can Offer 1. Commercializing Research: UBS Investment Bank, 2003 - 2004 2. Making Research Actionable: Lehman Brothers, 2004 - 2005 3. Monetizing Content: Barclays Capital / Lehman Brothers, 2006 - 2008 Conclusion A. Appendix: Professional, Educational & Personal Background Contact Information
  • Objective & Core Competencies I am pursuing opportunities in Desk Analytics, Product Management, Specialist Sales, Research, Corporate Access, Investor Relations and Financial Media My greatest Strengths are being a good listener who can tease out high Conviction ideas on my own or with others due to my Analyst training and communicate them effectively across all SPX sectors with an expertise in Industrials & Materials My skill sets include developing and disseminating Research as well as leveraging Thematic Content into Multi-Product outcomes Having been at the nexus of Research, Sales & Trading, I have a broad cross product Financial Services perspective which I can bring to bear on the investment process
  • What do Investors Want? Analysts must be willing to develop highly controversial, non-consensus positions on industries and stocks - and be right Help portfolio managers Outperform: A couple of great ideas a year will put an Analyst far ahead of peers Anticipating Change is worth a lot. Analyzing Change is worth much less Have enthusiasm and communicate that excitement to clients Being honest and admitting mistakes early increases credibility Cover exciting smaller cap companies Source: Morgan Stanley Equity Strategist Byron Wien, 4/26/93
  • What Research can Offer Good companies can be bad stocks and bad companies can be good stocks Analysts are valuable when helping determine the attractiveness of a stock by providing insight about future reality and the market’s likely reaction Analysts become indispensable because they provide the most insight, not because their stock picks are always right or their estimates are always perfect Analysts who provide the most insightful and most proactive Research to institutional clients are the most valuable to issuers looking to raise Capital Source: Piper Jaffray Director of Research Tom Schreier, 2000
  • 1. Commercializing Research UBS Investment Bank, 2003 - 2004
  • 1.1 Commercializing Research UBS INVESTMENT BANK, STAMFORD Director & Transportation / Aerospace Defense Equity Sales, 2003 - 2004 • Stamford Trading floor based specialized Research Salesperson / Desk Analyst providing high Impact Research calls & Trading opportunities of Industrials stocks to 25 of the firm's top institutional clients with sectorized responsibilities • Marketing Differentiated Research platform with geographically distributed Analysts, Breadth of coverage and Global representation by working with Global Airlines, Transport and Aerospace & Defense Equity Analysts • Maximizing the intraday Flow between Analysts, Trading and clients while protecting against Facilitation Costs; Leveraging Research into Convertibles and Fixed Income to derive relative value across the Capital Structure • #1 Block Trading volume of Airline stocks in 1Q04 with a 9% market share
  • 1.2 Specialist Sales Staying on Message Partners: A premium service that leverages geographically distributed Analysts as a Complementary overlay with Sales Depth: Provides industry insights to company specific Research calls and maintains an ongoing dialogue as Themes unfold Idea Generation: Draw upon Cash Equities, Derivatives, Converts, Fixed Income Transactional: Corporate Access to maximize Capital raising for issuers and Performance opportunities for investors Feedback: Timely, Consistent Feedback from non-deal roadshows, conferences Risk: Idea Generation that loses money for the firm through Facilitation Costs
  • 1.3 Client Coverage A Complementary overlay to Generalist Equity Sales, client coverage included: • Andor • Alliance Capital • AmEx • Balyasny • Citigroup • DeAM • Fidelity • Galleon • GIC • GSAM • ING • Jennison • Lazard • Lord Abbett • Maverick • MLIM • MSIM • Pequot • Putnam • SAC • T Rowe Price • TIAA/CREF • Wellington • ZBI
  • 1.4 Analyst Marketing US Transport & Aerospace / Defense Analyst Marketing NY: Andor, Balyasny, Chilton, Citigroup, DeAM, Galleon, GIC, GSAM, Jennison, JPMorgan, Maverick, MSIM, Pequot, SAC, Schroders, TCW, TIAA/CREF, ZBI Boston: AmEx, Babson, Brookside, Columbia, DeAM, Evergreen, Fidelity, John Hancock, MFS, Pioneer, Putnam, State Street, Tudor, Wellington, Westfield Atlantic: AmEx, Gartmore, Lord Abbett, MLIM, State of New Jersey, Sun America, T Rowe Price, Wellington London: ABN AMRO, DeAM, MLIM, O’Connor, Sarasin European Transport & Aerospace / Defense Analyst Marketing NY: Andor, Balyasny, Brown Brothers, GIC, Jennison, Mackay Shields, MSIM, SAC, Sierra Global, TIAA/CREF, Trident, ZBI Boston: Boston Co, Fidelity, Putnam Atlantic: Franklin, MLIM, T Rowe Price, Wellington
  • 1.5 Morning Call Best Practices It’s a Sales pitch, not a speech Attention spans are short Preparation: Use a bullet point outline for Key selling points Practice: Speak out loud, so you don’t end up reading Express Conviction: Use your voice and body language to convey confidence in your recommendation; Speak slowly, enunciate and project your voice Don’t give Sales a reason not to make your call: Minimize maintenance material to Sales, reiterating Research to Sales Traders; Avoid unfocused, lengthy Content providers
  • 1.6 Earnings Preview & Review Earnings Expectations: Summary of companies reporting the next day Ticker, (Recommendation, P/T) - xQ0y EPS $x.xx Est. vs. $x.xx consensus and $x.xx a year ago - xQ0y Revs $x.xB Est. vs. $x.xB consensus and $x,xxxMM a year ago - xQ0y Op Inc $x,xxxMM Est. vs. $xxxMM a year ago - FY0z Ests. for Revs $x.xB, Op Inc $x,xxxMM & EPS $x.xx vs. consenus $x.xx - Conference call dial-in, password Earnings Review: Initial read prior to conference call - Actual EPS, Revs & Op Inc vs. estimates and consensus - Key company achievements & management quotes - Updates to guidance - Performance in-line or above/below fundamental Research expectations - Likely stock price reaction
  • 1.7 Sales Commentary Recommendation Changes August 2003: All Aboard KSU Upgrade! - Operations - Transaction - Remaining Financing Issues - Valuation - Timing Global Laterals January 2004: Buy Long Haul, Sell Discount - and an Exception to the Rule - Ryanair Profit Warning / JBLU Earnings Preview - Buy Long Haul: US / Europe / Asia - Sell Discounters: US / Asia - An Exception to Every Rule: Europe / easyJet
  • 1.8 Cross Product Dinner Ideas Airlines Cross Instrument Ideas Hedge Fund Dinner, June 2003 • Geared toward clients with a fundamental Equity role who were: long Airlines at a low cost basis, feared they had missed the move off the bottom looking for alternative ways to get long exposure and/or going back to shorting the group • Airline Analyst: Equity Fundamentals: Bankruptcies for this cycle are behind us • Head of Equity Derivatives: Best Idea AMR Stock Replacement: Sell stock and buy 1 x 2 Call Spread - Lock in gains while maintaining long exposure through the Call Spread position • Head of Credit Derivatives: Best Idea Buy Boeing Capital Protection / Sell Boeing Corp Protection - Capital will Underperform due to leases, more Liquid than Airline credits
  • 1.9 Equity Origination West Japan Railway $2.3B Secondary Joint Global Coordinator & Book Runner - International Tranche 20x oversubscribed - Client received 100% of initial order, 2nd largest allocation - “Thanks again for JRWest” GOL Linhas Aéreas - CFO Stamford Trading Floor Visit - Specialist Sales IPO Pitch Letter XJT $137MM Convertible Underwriter - Deal Team Captain PACR $145MM Secondary Underwriter - Deal Team Captain
  • 1.10 Research & Events I identified ways to leverage Research & events to Capitalize on Change, establish myself, Differentiate our platform and Drive relationships & Revenue • Originated Branded CEO Dinner Series with JBLU, DAL, NWAC, CAL, LUV; Arranged and/or Executed Corporate Access with AMR, ACAI, EZJ, UPS, CSX, UNP, RTN, LMT, GD, JOYG • Arranged cross instrument dinner with Airline & Aero Analysts and Equity Derivatives, Converts & Credit Default • Arranged Trader dinner with Airline Analyst, Block Traders & Equity Derivatives and buyside Analysts & Traders; Executed cross sector dinner with Airline, Rail & Auto Analysts and buyside Analysts • Supported Aircraft & Transport Conferences, China Transport Supply Chain & NBAA BizJet Field Trips
  • 1.11 Events & Clients Dinners UBS Delta CEO Dinner Series: Andor, CSAM HY, Duquesne HY, Eqinox, GLG, GSPS, Mackay Shields HY, Principaled, T Rowe Price, UBS Prop, Wellington, ZBI Airlines Cross Instrument Ideas Hedge Fund Dinner: Balyasny, Chilton, Derchin, Galleon, GSPS, Hunter Global, O’Connor, Pequot, Satellite, Soros Non-Deal Roadshows & Field Trips ACAI CEO Boston NDR: Boston Co, Fidelity, Highfields, Putnam, Wellington AMR New CEO Dallas Headquarters Field Trip: AmEx, Carlson, Fidelity, Lazard, Lord Abbett, Primecap, Tudor, Waddell & Reed AMR New CFO West Coast NDR: Brandes, Capital, Primecap CSX New CFO NY NDR: Jennison, MSIM, PIMCO, Seligman, TIAA/CREF GD CEO & LMT CEO designate Washington Headquarters Field Trip: AmEx, Bernstein, Citigroup, GE, Janus, JPMorgan, Maverick, Neuberger Berman, Principal, SAC, State Street, Wellington RTN CEO designate & CFO Boston NDR: Fidelity, Putnam
  • 1.12 Events Drive Relationships I launched the Branded UBS CEO Dinner Series on an ad hoc basis. I solicited CEO participation either directly or through Investor Relations. Attendees would be primarily limited to ~10 sectorized Equity clients with large company holdings or large sector investors who could take/increase positions as well as ~5 Convert/Fixed Income clients to maximize the Dinner Series’ value internally A highlight of the UBS CEO Dinner Series was held with DAL where board member Gerald Grinstein was making his first appearance to investors as the company's new CEO. Feedback from the event included the following email from Sales: "Kenn just called to tell me how much he enjoyed the dinner you hosted with DAL this week. He was impressed by your insights and is eager to be kept in the loop on your thinking. He was gushing really” In addition to building Strong client relationships, my Performance review acknowledged the CEO Dinner Series as being Innovative in sponsoring events and building internal relationships with Converts & Fixed Income
  • 1.13 Change Drives Marketing In late April 2003, Railroad CSX named Oscar Munoz CFO. I impressed upon him the value non-deal roadshows provide to clients, managements and the sponsor firm. Munoz would benefit from exposure to clients who were unfamiliar with him due to his Changing industries. Clients would benefit from learning how Munoz's understanding of the digital Internet would apply to improving network returns from a poorly Performing physical Railroad. UBS would benefit as Corporate Access is one of the top three services clients value in paying firms Munoz agreed to have UBS conduct his first non-deal roadshow which was successfully Executed in early December visiting institutional accounts in New York. My relationship with the CFO later allowed me to market Commodity Derivatives as CSX began a fuel hedging program due to rising Crude Oil prices Beginning in April 2004, CSX reported the first of 16 quarters of yr/yr growth in earnings and Revenue combined with improved operational efficiency and safety costs. From $15.46 when named CFO, CSX increased >4x to $70.70 in May 2008
  • 1.14 Deals Drive Roadshows In late April 2003, KSU announced plans to increase its initial minority stake in the privatization of TFM to majority control. However, there were significant uncertainties regarding potential leverage/dilution due to the Mexican Government's above FMV Put Option to sell its remaining position to KSU. Separate from the Put, the Government owed a VAT sales tax refund With the stock trading at $11.56 in early August, UBS Analyst Rick Paterson upgraded KSU to a Buy with a $14.50 price target based on operational benefits and a probability weighted scenario of the remaining financing issues and resulting Capital Structure. The base case assumed that KSU/TFM and the Mexican Government would offset their obligations, while downside risk of $10 compared to potential upside of $18 Following the upgrade, KSU's CFO committed to doing their first NDR following the transaction's quiet period with UBS. The recommendation played out favorably as the parties later agreed to offset and KSU traded at $18.08 in December 2004
  • 1.15 Controversy Drives Trading In late July 2003, ACAI announced plans to Change its business model from being a contract carrier feeding legacy Airlines to being an independent low cost carrier. UBS Analyst Robert Ashcroft assumed coverage of ACAI in mid August with a Reduce rating due to his opinion that the company's existing assets where ill suited for their proposed Strategy. My relationship with the CFO resulted in the CEO agreeing to a non-deal roadshow visiting institutional accounts in Boston When MESA launched a bid with a 25% premium in early October to acquire ACAI and maintain the contract model, Ashcroft reiterated his Reduce rating and recommended that investors reverse the spread. Cash Trading captured first day volumes following the hostile offer of 50% for the acquirer and 25% for the target. When the CEO reiterated his Strategy on the NDR, holders exited the stock while the firm Dominated market share until the bid was terminated in late December ACAI launched its Strategy in June 2004. However, the controversial call proved correct when the carrier filed bankruptcy due to high costs in November 2005
  • 1.16 Conviction Drives Deals In mid March 2003 with the invasion of Iraq underway and Cash Equity Trading volumes ~50% of normal, UBS Analyst Sam Buttrick made a high Conviction call on the Airlines that they weren't all going bankrupt and to "buy the casket". AMR which was seeking labor concessions was his top pick after trading as low as $1.25 on March 12 In late April following the fall of Baghdad, AMR promoted President Gerard Arpey to CEO after negotiations faltered ahead of a May 1 deadline. Buttrick stayed with his call based on his ongoing discussions with Arpey and his view that the CEO's investor focus would lead him to opt for bankruptcy only as the last resort. With a revamped proposal accepted by all unions within days, AMR proceeded to rally to $7.59 by May 7 Afterwards, Arpey agreed to host a Headquarters Field Trip as the means to reintroduce himself to the investor community in his new role. UBS later acted as Lead Manager of AMR's next Secondary Offering in November '05
  • 1.17 Client Penetration Fidelity 1Q04 Vote • Peter Gallagher: 5 votes total from 3 different voters - Transports Equity PM/Analyst (Oct ’03): “Great help on the Airlines. Thanks” - High Yield Analyst (Aug ’03): “Thanks for the special attention” - Transports/Defense Sector Analyst • US Airlines Analyst: 11 votes from 3 voters (incl new Transports Nov ’03) • US Transports Analyst: 8 votes from 4 voters (incl new Transports Oct ’03) • European Airlines Analyst: 2 votes from 1 voter (1st Fidelity Boston votes) • Asian Airlines Analyst: 2 votes from 1 voter (1st Fidelity Boston votes) • Australian Airlines Analyst: 2 votes from 1 voter (1st Fidelity Boston votes)
  • 1.18 Management Accountability Weekly Highlights ending 6/13 • Made client calls regarding GD’s acquisition of Veridian • Contacted clients and Hedge Fund Sales desk following lowered Rail estimates • Highlighted Sea/Air/Rail/Truck Data Points and risk of Global trade slowing • Highlighted initiation of Finmeccanica with Hedge Fund, Risk Arb & Prop desks • Spoke with Risk Arbs regarding GD/VNX, DP/DHL/ABF & KSU/TFM/TMM • Finalized Airlines Cross Instrument Ideas Hedge Fund Dinner • Marketed with US Airlines Analyst at MLIM in Princeton
  • 1.19 January 2004 Review • Excellent knowledge of the industries. Able to leverage this Globally and across the Capital Structure • Very proactive in new role, especially internally. Built Strong internal relationships not only with Equity Analysts, but across many products (Cvts, Fixed Income, etc) • Successfully supported Stamford Trading. Received excellent Feedback • Working very well with various Global teams. Played an active role in European Analyst marketing in the US. Understands our Global mandate • Successfully supported Analysts in their Drive to get ranked. Helped 'coach' some 'up and coming' Analysts • Innovative/Creative - Proactive in sponsoring cross-product events (hedge fund dinners, field trips, etc). Challenges the status quo, always looking for new and Innovative ways to do business • Teamplayer - He is unselfish in his pursuit of coordinating and communicating with many colleagues around the world. He has been very supportive of the Analysts, always working to improve their ranking. He has acted as a mentor and coach for some, pushing them to keep Visible
  • 1.20 Recommendation Robert Ashcroft, former UBS Airline Equity Analyst, October 4, 2009 “I was the Airline Equity Analyst -- Peter was Transportation Sector Sales, in which role he was excellent, as attested to not only by the sell-side Analysts he supported but also the buy-sider clients. He fully understood my calls and worked hard to understand buy-side client requirements and how to marry the two. Several prominent buy-siders told me Peter was the Best Salesperson who covered them. From my standpoint, Peter made my life significantly easier. He was also outstanding at understanding what I should be doing to effectively communicate my message and coaching me to do so”
  • 1.21 Positive Feedback “Distribute this commentary out of London and include in tomorrow’s Daily” UBS Head of European Transportation Research “Making progress with [Institutional Investor Best of the Buy Side] Wellington PM” UBS US Regional Airline Analyst “Client originally said didn’t need Specialist Sales complimented you on DAL call” UBS Generalist Sales “You are Transportation”, UBS Generalist Sales “Thanks for arranging NDR & taking good care of us”, AMR Investor Relations “My Best sales guy buy a mile”, Fidelity PM/Analyst “Good on communication so give him my kudos”, T Rowe Price PM/Analyst
  • 2. Making Research Actionable Lehman Brothers, 2004 - 2005
  • 2.1 Making Research Actionable LEHMAN BROTHERS, NEW YORK VP & Product Manager, Industrials & Materials Equity Research 2004 - 2005 • Responsible for management & distribution of Industrials, Materials & Services Research across Lehman’s Equity business and into buy side accounts. Present daily summary of Key ‘calls’ and breaking news to Sales Traders. Partner with Trading to quickly interpret Information for clients • Partner with Industrials, Materials & Services Equity Research Analysts - act as a sounding board in developing Impact calls; Drive Content creation; participate in Investment Policy Committee meetings for initiations & ratings Changes; provide Feedback to Analysts; provide Trading color; encourage quick response to events Industrials, Materials & Services represented 36% of 2004 US Equity and Equity related issuance, including $9.2B in IPO’s and $42B in follow-ons
  • 2.2 Product Management Content is King: Trusted Advisor responsible for shaping more Actionable calls Foster Idea Generation and Drive Themes within & across sectors that can be Expressed across asset classes & product types Increase Consistency of high Conviction, Differentiated fundamental Research Commercialize Actionable Research, minimize maintenance noise Maximize Information Flow between Analysts, Sales, Trading, investors & issuers Develop Key franchise stocks with Dominant market shares Think Strategically, Act Tactically = Think Globally, Transact Locally Risk: Too closely Aligned with Research rather than independent judgement
  • 2.3 Sector Coverage As the Industrials & Materials Product Manager, sector coverage included: • Aerospace & Defense #3 ranked II Analyst • Airlines #2 ranked II Analyst • Autos & Auto Parts R/U ranked II Analyst • Business Services • Chemicals/Commodity #2 ranked II Analyst • Chemicals/Specialty R/U ranked II Analyst • Diversified Industrials • Educational Services #2 ranked II Analyst • Environmental Services #3 ranked II Analyst • Homebuilders • Machinery #2 ranked II Analyst Metals & Mining #1 ranked II Analyst • Multi-Industry #2 ranked II Analyst • Paper & Packaging #3 ranked II Analyst • Small Cap Industrials
  • 2.4 Daily Routine Lehman Brothers Before the Bell (“BTB”) - Sales Trader ‘talking points’ of 2-3 most Actionable Research calls by sector Lehman Industrials & Materials Catalist (“Catalist”) - Product Manager commentary - Technology solution aggregates bullets from Research notes published overnight - Calendar of Data Points, earnings, conferences and proprietary events Product Managers speak in Sales Trader Morning Call Product Management runs Research Morning Call Idea Generation Bloombergs Visit Analyst floors regarding Research pipeline
  • 2.5 Research Morning Call Convince Sales why they NEED to actively call clients to Transact Recognize Sales may not have read your report or remember your prior stance Hook Sales: A headline to remember Lead with Conclusion: Ground Research with what to do with the stock Key Selling Points: ‘3 reasons’ in short, punchy sentences; Context with preexisting facts/view; Why call worthy and how Differentiated from consensus Be Brief: Don’t let your message get lost in too many details; “Less is More” allows Sales to follow up with questions when their interest is peaked
  • 2.6 Data Points Aerospace/Defense: Monthly DOD Cash Outlays; Commercial Aircraft Deliveries Autos: Monthly Auto Sales Chemicals: Monthy Volumes & Pricing Homebuilders: Quarterly Orders Machinery/Multi-Industry: Monthly Orders, Sales; Rolling 3 Month Orders, Sales Metals: Daily Prices; Monthly Orders, Sales Paper: Weekly Orders & Prices; Monthly Shipments Rails: Weekly Carloadings
  • 2.7 Conference Break-In’s Standardized Conference Feedback with Tear Sheets • Company (Ticker) - Speaker, Title - Location, Time - Recommendation, P/T, Estimates • What do we Expect to Hear? • What did we Learn? • What to do with the Stock?
  • 2.8 Sector Primers Key Machinery Vocabulary - Construction, Agricultural Equipment & Truck Terms, Mining Equipment Types Machinery Companies End Market Exposure • Large Cap vs. Small Cap - CAT, ITW, DE, IR, PCAR, ETN, PH, JOYG, TEX, KMT, URI, MTW, KDN, BUCY • Early Cycle: Trucks & Engines, Truck & Auto Components, Energy, Aerospace • Mid Cycle: Power Gen/Electrical, Construction, Rental, Paving • Late Cycle: Cranes, Mining Equipment • Non-Cyclical: Refrigeration & HVAC, Food Service, Agricultural Equipment
  • 2.9 GM Event Call “Strategy Group” Type Product - Complex Capital Structure - Lehman articulates Equity and Credit perspective - Multiple paths to Execution based on client objective and investment conclusion - GM Convert vs. Common, CDS 5 yr vs. 7yr, GM Credit vs. CDS; F vs. GM Vol Coordinated Research & Trading Calls - 3/17: GM Downgraded Underweight; Auto Sales (Auto Analyst; Credit Strategy) - 3/18: GM Converts Comments (Converts Analyst) - 5/5: Krikorian Tender; S&P Downgrade (Auto & FI Analysts; Credit Strategy) - 5/10: Fundamentals; Cap Structure Opportunities (Auto, Convert & FI Analysts) - 7/14: GM Upgrade to Neutral; Convert Reiteration (Auto & Convert Analysts) - 7/27: GMAC/BofA Financing; GM/GMAC vs. F/FMCC (Auto & FI Analysts) - 8/25: Moody’s Downgrades; Reiterate GM vs. F (FI Analysts; Credit Strategy) - 10/19 Post Earnings Conference Call (Auto, Derivatives, Convert, FI Analysts)
  • 2.10 Breaking News CD Idea Bloomberg / Morning Sales Trader Comments • CD breaks into 4 companies disappointing. CD confirmed break-up into 4 separate companies - RE, Travel, Hotels and Car Rental • Prior to announcement, Business Services Analysts had Expressed a preference for the prior Strategy of Real Estate and integrating Travel • However, as part of the break-up announcement, management lowered 4Q05 EPS and FY06 Revenue & EBITDA guidance and withdrew their $2B buyback target from cash flow & divestitures due to slowing leisure Travel and a weak Europe • In my opinion, while Traders will likely bid CD up, investors may sell into Strength given no upside in break-up value vs. current P/T, weak ops/acqs, always Changing Strategy and portfolio churn
  • 2.11 Cross Sector Laterals GM, Auto Parts, Steel & Coal Trading Ideas - GM FY05 guidance disappointing, mid decade profit goal pushed to right - Could lower GM production & Steel costs be worse for Auto Parts names? - AXL (80% GM exposure) earnings, cash flow & cap ex guidance very weak - Auto exec thinks Steel inflation worse than Lehman’s above consensus view - POSCO EPS reflect Strong China demand; raising Steel price on material cost - US Steel prices could decline more gradually on lower imports, high material cost - Potential negative Lateral for ARM with 23% unprotected Steel exposure - BTU top Coking Coal pick - X makes high end Steel Products
  • 2.12 Event Commentary LMT Georgia Field Trip: Aero Facility Tour & F/A-22 Raptor Program Update Is there a case to shut the line building the F/A-22 Raptor fighter? • Judging from enthusiasm, threats and aircraft’s progress, there might be upside - Company Overview - Aircraft Operational Requirements - Current Contract - Investor Concerns - Alternatives - R&D Funding - Potential Enemy Threat Requirements - Upcoming Program Milestones/Catalysts - Sense of Growing Support for Production Increases
  • 2.13 Trade Idea Performance Trading Ideas Performance Review Ticker Call Open Price Status Date Last Δ% SPX Last SPX Δ% Over/Under BA Long 5/11/05 $61.04 Closed 12/30/05 $70.24 15.1% 1166.22 1248.29 7.0% 8.0% CAT Long 5/11/05 $44.83 Closed 12/30/05 $57.77 28.9% 1166.22 1248.29 7.0% 21.8% TRW Long 5/11/05 $19.96 Closed 12/30/05 $26.35 32.0% 1166.22 1248.29 7.0% 25.0% GM Short 5/11/05 $31.53 Closed 12/30/05 $19.42 38.4% 1166.22 1248.29 7.0% 45.4% GM Short 10/6/05 $28.63 Closed 12/30/05 $19.42 32.2% 1196.39 1248.29 4.3% 36.5% BA Long 9/21/05 $63.45 Closed 12/30/05 $70.24 10.7% 1221.34 1248.29 2.2% 8.5% UTX Long 10/19/05 $49.95 Closed 12/30/05 $55.91 11.9% 1178.14 1248.29 6.0% 6.0% UTX Long 10/27/05 $50.90 Closed 12/30/05 $55.91 9.8% 1191.38 1248.29 4.8% 5.1% BA Long 10/27/05 $65.10 Closed 12/30/05 $70.24 7.9% 1191.38 1248.29 4.8% 3.1% LMT Short 10/27/05 $60.07 Closed 12/30/05 $63.63 (5.9%) 1191.38 1248.29 4.8% (1.1%) CD Short 10/24/05 $20.09 Closed 12/30/05 $17.25 14.1% 1179.59 1248.29 5.8% 20.0% PCAR Short 10/4/05 $68.34 Closed 12/30/05 $69.23 (1.3%) 1226.70 1248.29 1.8% 0.5% ARM Short 11/15/05 $17.28 Closed 12/30/05 $14.39 16.7% 1233.76 1248.29 1.2% 17.9% AMR Long 10/20/05 $12.40 Closed 12/30/05 $22.23 79.3% 1195.76 1248.29 4.4% 74.9% LUV Short 10/20/05 $15.58 Closed 12/30/05 $16.43 (5.5%) 1195.76 1248.29 4.4% (1.1%) PNR Short 10/25/05 $36.26 Closed 12/30/05 $34.52 4.8% 1199.38 1248.29 4.1% 8.9% BOW Short 10/4/05 $28.15 Closed 12/30/05 $30.72 (9.1%) 1226.70 1248.29 1.8% (7.4%) SBL Long 10/28/05 $8.20 Closed 12/30/05 $12.82 56.3% 1178.90 1248.29 5.9% 50.5% BXC Short 10/28/05 $12.10 Closed 12/30/05 $11.25 7.0% 1178.90 1248.29 5.9% 12.9%
  • 2.14 June 2005 Review Peter has done a very good job at developing several Themes in conjunction with his sector Analysts Peter does an exceptional job Expressing himself verbally in the 7:05AM Sales Trader meeting Feedback on the GM Equity/Debt/Convert coordination was very Strong across the organization His thoughts are well organized and well written Peter has developed additional product industry knowledge by doing joint marketing with senior Analysts and senior management teams Global cross border Content has been managed effectively
  • 2.15 Positive Feedback GM Event Call - “Is it OK to use your GM Bloomberg in my Daily on Monday?” European Industrials Sales Specialist - “Where are F Credit Spreads now vs. earlier? You are doing a great job” Co-Head of New York Research Sales - “Completed and submitted your [Cross-Divisional Bonus Pool] nomination” Head of US Convertible Research “Good one on CD this AM. If you are not on his Industrials list you are missing out” Head of Global and US Sales Europe “You have been VERY helpful with the recent trifecta of Coal/Steel/Auto Suppliers” Hedge Fund Sales “Nice job on LMT Field Trip comments - we are still struggling to get a note out” US Aerospace & Defense Analyst
  • 3. Monetizing Content Barclays Capital / Lehman Brothers, 2006 - 2008
  • 3.1 Monetizing Content BARCLAYS CAPITAL / LEHMAN BROTHERS, NEW YORK VP & Content Manager, Equity Trading Desk Analyst, 2006 - 2008 • Manage market Driven morning Sales Trader meeting, seeking to generate Content Complementary to published Research based on breaking news and position Trader insights Expressed through Cash and non-Cash Equity products • Review Content for Prop opportunities, monitor Risk positions and track Performance as well as managing Thematic Investing process, evaluating Best Execution, recommending Trades and monitoring the FID JV portfolio • The success of Lehman's Desk Analytics model increased Commissions +8% ($50MM annualized), reduced Facilitation Costs from 30% to 15% ($90MM annualized) and doubled Prop Revenues on the US Cash Trading desk ($80MM annualized)
  • 3.2 Desk Based Analytics Going to Market Together Content Driven Revenue model with greater mind/market share & Commissions Lowers Facilitation Costs through enhanced Risk Taking Monetizes Idea Generation through customer Trades & Prop positions Seeks Origination opportunities through Block Trades, Reverse Inquiries, Secondary Offerings and New Issuance “Star Alignment”: Shared Research and Trading high Conviction Risk: Overly focused on Trading P&L rather than selling ideas; Who you sit with is how you are Aligned and how you are compensated
  • 3.3 Idea Generation A good Analyst has a top down approach that focuses on major fundamental Themes, identifies what's incremental to their thesis then selects outlier stocks that haven't moved yet ahead of specific Catalysts. This includes seeing Laterals across sub-sectors. Analysts also gain Conviction from sentiment, Flows and technicals While having a Strategic framework, a good Analyst is also willing to act Tactically in Changing his pecking order of top recommendations based on price movements, to Change ratings when a price target has been achieved and fundamentals are Unchanged and to move on when circumstances Change Underlying this top down approach is an Analyst's ability to generate a better Revenue forecast than consensus on a sector/company basis, as this involves the most guesswork by the sell side whereas costs are relatively predictable. An ability to add Alpha can also be enhanced by understanding what Options are pricing in ahead of events in order to the determine the best way to Express an idea
  • 3.4 Trading Morning Call Flows have Themes, Beget more Flows Thresholds: High Conviction ideas, Block names, high volumes/market shares Axes/Flows: Focus on Naturals where they are axed and how they are set up; Why they are involved and what’s Driving the stock Themes/Differentiated Data Points: 1 or 2 Thematic reasons regarding a stock/ sector; Data Points that Impact a Global sector value chain; levels where Trading would provide Liquidity and Laterals which haven’t reacted Ahead of the Market: Proactive so clients can position ahead of Catalysts rather than reporting yesterday’s event Driven trade Broadened Sources: In addition to Research Driven Cash Equity Strategies, include Vol, Converts, Programs, Fixed Income as alternative ways to Express
  • 3.5 Morning Call Recap Liquid Markets Morning Call Recap • Overseas Update - Asia was generally weaker as Tech rolled over, Shippers declined and Resource names followed Commodity prices lower. Europe is higher on a rebound in Banks • By Sector - Accounts should consider selling/shorting Retail as a mean reversion trade following recent Outperformance by the MVRX of +10% in the last 2 weeks and 20% over the last month - Accounts should consider pairing long BKC / short MCD given BKC’s better growth rate for a similar valuation and ahead of indications of any negative Impact on MCD comps from a Stronger US$; BKC recently upgraded
  • 3.6 DBA Conviction Recap High Conviction Desk Based Analytics Commentary • New High Conviction Ideas - Industrials: Buy ETN with upside to the low $80’s as the multiple has contracted to one of the cheapest in the Machinery/Electrical/Multi sectors. The business mix has shifted dramatically away from deeply cyclical to Electrical now being 45% of sales. A slowdown’s Impact should be much less than in the past, there are synergies from 2 large acquisitions and limited downside remaining in their early cycle Truck business • Reiterations - Financials: Remain seller of AIG on expected continued weakness into its September reorganization review as a bigger portion of Capital raised could come in the form of Equity
  • 3.7 Equity Synthetics Marketing Custom Indices can provide better diversification, yield, Liquidity & M&A exposure than singles stocks or ETF’s Telecom Index Telecom HOLDRs Ticker Yield Index Weighting Ticker Index Weighting Yield FRP 12.0% 7.9% T 28.0% 5.3% VCG 10.9% 8.8% VZ 24.2% 5.3% CNSL 10.3% 8.8% BLS 17.6% 3.6% IWA 9.3% 8.2% S 13.7% 0.4% CZN 7.9% 7.9% AT 4.5% 2.5% ALSK 7.0% 9.3% BCE 4.3% 5.6% CTCO 5.8% 9.0% Q 2.9% 0.0% T 5.3% 7.6% TDS 1.4% 0.9% VZ 5.3% 7.8% TDS/S 1.4% 1.0% BLS 3.6% 8.5% CTL 1.3% 7.1% AT 2.5% 8.2% LVLT 0.5% 0.0% S 0.4% 8.1% CBB 0.3% 0.0% 6.7% 100% 100% 3.9%
  • 3.8 CDS Primer CDS Primer / Glossary Credit volatility and financial markets interdependence increased interest in CDS - CDS: Risk Management tool to hedge loan exposure or diversify credit risk - CDX: CDS indices of investment grade, crossover and high yield bonds - LCDX: Allows investors to go long or short US leverage loans - ABX: Allows investors to go long or short US sub-prime residential mortgages - CMBX: Allows investors to go long or short US commercial mortgages Daily Performance Investment Grade High Yield 6/6/07 bp Daily Δ 6/6/07 bp Daily Δ CDX.IG 8 35 1 CDX.HY.100.8 263 5 CDX.XO 8 146 4 LCDX.8 107 1 7/27/07 bp Daily Δ 7/27/07 bp Daily Δ CDX.IG 8 75 8 CDX.HY.100.8 527 12 CDX.XO 8 358 13 LCDX.8 367 38
  • 3.9 LBO Candidates JV $125MM Equity / $350MM CDS LBO Candidates Thematic Investment JV w/ FID - Screening Process: EPS Power, Cash Flow Vol, Leverage, Inside Ownership - Fundamental Review: Equity & Fixed Income Analysis - Identify Candidates: Debt Capacity / Return Potential; Equity & FID Align - Security Selection: Equity / Vol vs. CDS? - Trade Parameters: Entry Level, Downside Risk Assessment, Upside Exit - Watch List: Candidate Stock Price vs. Entry Level Target - Execution: Fundamentals Intact? Trading Approval; Build Positions - Portfolio Tracking: Aggregating Equity & CDS P&L - Closing Out Positions: Parameters (B)Reached, Catalysts Occurred / Receding - Performance Reports: Daily Update / Monthly Recap
  • 3.10 JV Portfolio Performance LBO Candidates Thematic Investment JV Portfolio PerformanceTicker Sector Call Open Basis Price Δ% Floor Risk Ceiling Return SPX Δ vs. SPX Comments Shares Cost P&L ABC Industrial Long 3/14/07 $29.78 $36.99 24.2% $27.00 -27.0% $40.00 8.1% 11.3% 12.9% Adding on Correction 150,000 $4,467,000 $1,081,500.00 DEF TMT Long 3/15/07 $43.40 $49.70 14.5% $38.00 -23.5% $50.00 0.6% 10.6% 3.9% Scaling Out on Spin 95,000 $4,123,000 $598,500.00 GHI Financial Long 4/10/07 $27.95 $30.25 8.2% $26.00 -14.0% $36.00 19.0% 6.2% 2.0% Built on Pullback 450,000 $12,577,500 $1,035,000.00 JKL TMT Long 2/28/07 $5.24 $5.59 6.7% $5.00 -10.6% $8.00 43.1% 9.7% -3.0% Lower Cost on Fall 2,375,000 $12,445,000 $831,250.00 MNO TMT Long 3/28/07 $36.29 $38.36 5.7% $33.25 -13.3% $42.50 10.8% 7.4% -1.7% Adding on Pullback 284,380 $10,320,150 $588,666.60 PQR Industrial Long 5/3/07 $48.46 $50.05 3.3% $45.00 -10.1% $60.00 19.9% 2.5% 0.8% Built on EPS Decline 250,000 $12,115,000 $397,500.00 STU Retail Long 5/10/07 $46.10 $47.58 3.2% $40.00 -15.9% $52.00 9.3% 1.4% 1.8% Profit Taking in CDS 100,000 $4,610,000 $148,000.00 VWX Financial Long 2/5/07 $22.10 $22.45 1.6% $20.00 -10.9% $27.75 23.6% 5.9% -4.3% Lower Cost on Fall 805,000 $17,790,500 $281,750.00 YZA Industrial Long 1/25/07 $33.14 $33.63 1.5% $30.00 -10.8% $40.00 18.9% 6.5% -5.0% Built on EPS Decline 375,000 $12,427,500 $183,750.00 BCD Retail Long 5/25/07 $31.97 $32.10 0.4% $30.50 -5.0% $40.00 24.6% 1.8% -1.4% Adding before BTS 250,000 $7,992,500 $32,500.00 EFG TMT Long 2/13/07 $15.70 $15.57 -0.8% $14.00 -10.1% $25.00 60.6% 7.0% -7.8% Lowered Basis 800,000 $12,560,000 ($104,000.00) HIJ Retail Long 3/12/07 $33.42 $31.96 -4.4% $29.00 -9.3% $38.00 18.9% 9.4% -13.8% Adding on Correction 350,000 $11,697,000 ($511,000.00) $123,125,150 $4,563,416.60 Ticker Sector Maturity Open Basis Price Δ% FV + / - FV Horizon Return CDX.IG7 Δ vs. IG7 Comments Call Notional MTM ABC Retail 7 yr 2/12/07 94 bps 89 bps -5.3% 81 bps 8 bps 203 bps 128.1% 3 bps -7 bps >FV, Consider Equity Long $40,000,000 -$116,000.00 DEF Retail 5 yr 1/29/07 24 bps 13 bps -46.4% 203 bps 1,461.5% 2 bps -13 bps Consider Steepener Long $55,000,000 -$266,062.50 DEF Retail 7 yr 1/19/07 38 bps 20 bps -46.7% 39 bps -19 bps 203 bps 915.0% 1 bps -20 bps Consider Steepener Long $15,000,000 -$152,250.00 DEF Retail 10 yr 1/29/07 47 bps 31 bps -33.3% 203 bps 554.8% 2 bps -18 bps Consider Steepener Long $13,000,000 -$151,125.00 GHI Retail 10 yr 1/24/07 39 bps 41 bps 5.1% 36 bps 5 bps 203 bps 395.1% 2 bps 0 bps Consider Scale Out Long $50,000,000 $93,750.00 JKL Health 10 yr 2/6/07 76 bps 72 bps -5.0% 56 bps 16 bps 203 bps 181.9% 3 bps -6 bps Maintain CDS Long $50,000,000 -$84,375.00 MNO Retail 7 yr 2/8/07 52 bps 62 bps 19.2% 50 bps 12 bps 203 bps 227.4% 4 bps 8 bps Profit Taking in CDS Long $25,000,000 $145,000.00 PQR Industrial 7 yr 1/31/07 82 bps 58 bps -29.5% 68 bps -10 bps 203 bps 250.0% 2 bps -26 bps Consider Steepener Long $40,000,000 -$533,600.00 PQR Industrial 10 yr 2/5/07 105 bps 82 bps -21.9% 203 bps 147.6% 3 bps -25 bps Consider Steepener Long $10,000,000 -$172,500.00 STU Retail 7 yr 2/5/07 83 bps 66 bps -20.0% 66 bps 0 bps 203 bps 207.6% 3 bps -19 bps Consider Exit on B/B Long $50,000,000 -$442,250.00 $348,000,000 -$1,679,412.50
  • 3.11 Financial Fallout Candidates Identified stocks with varying degrees of risk from a Financial Services slowdown • By Tier - Tier 1: Short Recommendations - Tier 2: Alternative Short Candidates - Tier 3: Avoid Shorting • By Sector - Credit Cards - Rating Agencies - Financial Documents & Publishers, Data Providers & Services - Real Estate Services - Hardware, Storage, PC’s, Software, ATM’s - Exec Search & Training, Background Checks, HR & Payroll Outsourcing, Staffing - Transportation, Other
  • 3.12 Trade Recommendation Short SLG • Thesis - NY Financial Services exposure >50% inclusive of Legal & Professional Services - GKK investment similar to a CMBS CDO fund • Catalysts - Wall Street layoffs due to credit write-downs and reduced IPO and M&A volumes - Write-downs of direct structured finance investments or GKK carrying value • Bear Case - Lower occupancy, scarce financing, fewer transactions, Changing buyer profile - GKK Revenue stream could run out sooner than expected • Bull Case - Dividend is safe, stock buyback authorization
  • 3.13 Trading Call Performance SLG Trading Call Performance - 11/30/07: $103.90 Short Potential job cuts, sentiment risk, recovered $10 - 1/11/08: $84.80 Don’t Short Fundamentals haven’t Changed, NAV discount - 1/14/08: $84.90 Don’t Short Play for bounce ahead of earnings - 1/16/08: $84.81 Don’t Short Consider alternative short candidates - 1/28/08: $94.16 Short Short side getting interesting after EPS bounce - 2/1/08: $98.77 Short High Conviction 3:1 risk/reward on technicals - 2/19/08: $87.19 Don’t Short Mid year Wall St layoffs could cause revaluation - 2/26/08: $95.20 Short Stock recovery, IPO and M&A volume declines - 2/27/08: $95.42 Short VNO mezzanine write-offs, GKK exposure - 2/28/08: $95.05 Short Stock flat while CMBS widened 27.5 bps - 3/7/08: $84.00 Short High probability <$80, low probability ~$90
  • 3.14 Risk Management Weekly Review of Top 10 Positions - What’s new and why, positions increased/decreased/exited, incremental news Current Rank Previous Week Ticker Sector Position Gain/(Loss) Shares Cost Basis Inception Δ% Wk/Wk Δ% 1 Unch ABC Financials $20,328,328 $685,482 460,021 $42.70 3.5% 4.4% 2 Unch DEF Consumer $12,861,750 ($305,265) 275,000 $47.88 -2.3% -1.5% 3 4 GHI Healthcare $12,287,385 $87,628 546,106 $22.34 0.7% 0.8% 4 13 JKL Energy $10,050,581 $272,222 173,735 $56.28 2.8% 4.6% 5 10 MNO TMT $9,853,321 ($262,305) 899,847 $11.24 -2.6% -5.2% 6 3 PQR Consumer $9,758,607 $91,495 311,081 $31.08 0.9% 0.1% 7 6 STU TMT $8,902,402 $218,637 800,576 $10.85 2.5% 3.2% 8 Unch VWX Financials $8,622,000 $213,918 200,000 $42.04 2.5% 1.5% 9 5 YZA Industrials $8,353,990 $350,533 298,463 $26.82 4.4% 1.7% 10 New BCD TMT ($8,200,537) ($490,373) (262,585) $29.36 -6.4% -8.1% $92,817,827 $861,972 Wk/Wk $Δ ($12,923,641) Previous Week Current Rank Ticker Sector Position Gain/(Loss) Shares Cost Basis Inception Δ% Wk/Wk Δ% 7 15 EFG Financials ($5,206,000) $51,856 (200,000) $25.77 -1.0% -0.6% 9 Closed HIJ TMT $0 $0 0 $0.00 Closed -0.2%
  • 3.15 Strategy Raising Visibility while Reinforcing Scarcity Value - Commentary Formats - Internal / External Distribution Lists - Morning Meeting Access / Delivery - Proactive Selling of Idea Generation Trading Consistency - Portfolio Managers vs. Risk Managers - Volatility vs. Losses - Defined Objectives / Constraints vs. Reference Dependent - Multi-Sector Portfolio Approach vs. Core Sector Positions - Track Multiple Security Trade vs. Single Stock Return Software Applications - Commentary Portal - Desktop Analytics Tool
  • 3.16 June 2007 Review You have taken both the Content captain and idea capture roles to a new and great level for the Trading and Desk Analyst teams Morning meeting Content has improved dramatically including topical speakers from off the floor. Continue to follow your gut on the structure You have owned the ideas, improved Execution and even raised the P&L Impact through better structuring Your role in organizing, filtering ideas and combing two organizations (FID and EQ) for ideas has been positively noted by members of FID management
  • 3.17 Positive Feedback Morning Call Meeting / Content / Recap - “Beneficial since sectorizing to concentrate on what Traders are Anticipating” NYSE Floor division - “This awesome”, Co-Head of New York Research Sales - “This is great today”, Co-Head of Liquid Markets Salestrading - “We are getting much better ‘tradable’ Content with the new model”; “This piece is helpful”; “Our group in Dallas are big fans”, various Sales Idea Generation - “Feedback from Sales was that this was helpful”, Head of Product Management - “That’s a good case”, Co-Head of New York Research Sales - “We would love to do a Swap on this Index”, Head of Equity Synthetics Trading - “Agree with all... good stuff”, Head ETF Trader - “Good intraday work”, Hedge Fund Sales
  • Conclusion Themes Conviction, Conviction, Conviction! Quality, Innovation, Branding Dissemination, Alignment, Feedback Key franchise names, Idea Generation, Monetizing Content We don’t trade stocks, we trade Information Content is King
  • Appendix Professional, Educational & Personal Background
  • A.1 Professional Background Mr. Gallagher has an extensive Investment Banking career servicing both Corporate & Government entities including Global experience providing Equity Research & Offerings, Privatization Advisory, Debt Raising and Structured Products. He has been responsible for 1) making recommendations to institutional investors, 2) marketing Global Financial Services including Capital Markets, Risk Management & Credit Products and 3) structuring Corporate Finance solutions by combining industry expertise with geographic client coverage & product capabilities. As an Equity Analyst, Mr. Gallagher’s insights & client service were recognized in Research votes by firms as diverse as Fidelity and Tiger Management. As a Corporate Finance Officer, he provided risk/return analysis for new transactions and negotiated Credit Facilities, Structured Financings and Derivative transactions. Mr. Gallagher also supervised junior staff and sought to identify potentially deteriorating situations in order to reduce holdings or improve collateral. His activities have involved advising government entities or their applicants including the Republic of France, the Government of Sri Lanka, The Export-Import Bank of the United States and regulators from the Federal Reserve
  • A.2 Equity Research U.S. BANCORP PIPER JAFFRAY, NEW YORK Research Analyst, IT Services Technology Equity Research, 2000 - 2001 • Forecast slowing IT spending as consulting engagement sales cycle lengthened • Developed long term IT Services valuation framework LAZARD FRERES & CO. LLC, NEW YORK Vice President & Research Analyst, Airline Equity Research, 1998 - 1999 • Initiated coverage of domestic growth Airlines (“LCC’s”) in Fall 1998 • Provided analysis of pilot contracts for Air France Advisory prior to 1999 IPO • Provided analytical support for #1 Institutional Investor Distressed Debt team PAINEWEBBER INCORPORATED, NEW YORK Associate Analyst, Airline Equity Research, 1996 - 1998 • Associate Analyst to #1 Institutional Investor Airline Equity Research Analyst • Published notes, maintained earnings models and updated statistical databases • Conducted due diligence of China Southern Airlines prior to 1997 IPO
  • A.3 Corporate Finance THE CHASE MANHATTAN BANK, NEW YORK Associate, Global Aerospace Group/Global Transportation Group, 1992 - 1996 • Corporate Finance Officer with Airline & Aerospace/Defense client relationships • Structured, negotiated, and documented Privatization Advisory, Aircraft Finance & Derivative transactions • Advised Air Lanka’s privatization, Mexican industrialist’s CAL Ch 11 investment • Financed aircraft for VARIG Brazil, Royal Air Maroc and Cathay Pacific • Restructured USAir credit in exchange for collateral after 1991 Gulf War Associate, US Corporate Markets, 1987 - 1991 • Previously as a generalist, coverage included Airlines & Shipping, Real Estate & REITS, Retail, Home Builders & Building Products, Financials, Pharmaceuticals, Technology & Telecommunications and HLT’s/LBO’s • Completed credit training program, prepared new credit approvals and supervised annual reviews of existing loans
  • A.4 Equity Recommendations Technology Spending Cycle Mr. Gallagher began noting anecdotes in July 2000 of lengthening sales cycles for the underlying Internet-based Technologies IT Services firms were deploying for their clients. As new IT Services engagements slowed, an initial internal conference call with Software Analysts indicated no concurrent fall off in bookings. A subsequent call confirmed expectations of less IT Services engagements resulting in fewer Software products being recommended, sold & implemented Reno Air Mr. Gallagher initiated coverage of Reno Air with a Speculative Buy recommendation just prior to the company’s acquisition by American Airlines. Mr. Gallagher had also been quoted in BusinessWeek and his firm named a share buyback participant
  • A.5 Advisory Republic of France/Air France Advisor to the Republic of France for the privatization of Air France and Underwriter of Air France’s IPO. Mr. Gallagher provided analysis of U.S. Airline concessionary contracts as a benchmark for seeking labor cost savings during a pilot strike prior to Air France’s partial privatization. Mr. Gallagher recommended methods of capital markets distribution and marketed the shares to investors Government of Sri Lanka/Air Lanka Advisor to the Government of Sri Lanka’s Public Enterprise Reform Commission to privatize the national carrier Air Lanka in the midst of an ongoing religious/ethnic civil war. Mr. Gallagher prepared the Technical Proposal and negotiated the Contract of assignment milestones & associated fee payments Continental Airlines/Houston Air Advisor to Houston Air’s bid for Continental during bankruptcy. Mr. Gallagher conducted due diligence and provided industry expertise to the M&A deal team
  • A.6 Ex-Im Bank VARIG Brazil As Arranger, underwrote Ex-Im Bank guaranteed notes to finance a VARIG Brazil McDonnell Douglas MD-11 aircraft. The transaction utilized a trust structure through which the loan notes were securitized and sold into the public capital markets to institutional investors. Mr. Gallagher’s analysis of VARIG’s credit risks led to obtaining credit enhancement from the export manufacturers McDonnell Douglas & General Electric in the form of a subordinated loan tranche to assure that the purchase obtained Ex-Im Bank’s guarantee commitment. The manufacturers’ subordinated notes were later sold to international banks Royal Air Maroc As Trustee, arranged the private placement of Ex-Im Bank guaranteed notes to finance two Royal Air Maroc Boeing 737-400 aircraft. Mr. Gallagher negotiated the mandate letter, term sheet & fee structure and proposed Ex-Im Bank guaranteed alternatives when the transaction was at risk of failing to close
  • A.7 Aircraft Finance Cathay Pacific Airways/Wilmington Trust as Trustee As Agent and Underwriter, provided financing for a U.S. Ownership Foreign Sales Corporation (FSC) lease financing of a Cathay Pacific Airways Boeing 747-400 aircraft. The borrower was a special purpose grantor trust whose principal asset consisted of the stock of a foreign sales corporation (FSC lessor) which was pledged to the lenders as security for the loan. The FSC lessor invested the loan proceeds by purchasing the aircraft. The aircraft was leased to a special purpose Bermuda trust and subleased to Cathay Pacific. Mr. Gallagher conducted due diligence, prepared credit approvals & negotiated documentation and marketed the loan to international banks
  • A.8 Structured Products Cathay Pacific Airways Concurrent with the FSC financing, lenders entered into an interest rate swap to pay Cathay Pacific fixed payments and receive Libor based floating payments. Mr. Gallagher analyzed credit, cross default, intercreditor & indemnification risks / mitigants, prepared credit approvals and negotiated documentation HK Telecom Chase participated in the sale and leaseback of an aircraft portfolio that resulted in the acceleration of foreign source income and the utilization of associated tax credits. Mr. Gallagher provided industry expertise to accounting & tax deal team members, conducted due diligence on the structure & related cash flows and participated in preparing the transaction approval memo Interest Rate & Fuel Price Hybrid Hedging Strategies Mr. Gallagher marketed Strategies to lower costs up to 30% through the correlation benefits of hedging aggregate exposures
  • A.9 Credit Delta Air Lines As a Lead Bank, provided a commitment for a bank letter of credit after assessing that the risk profile would remain Unchanged under an existing credit agreement. The commitment was required to credit enhance outstanding ESOP notes guaranteed by Delta pursuant to a trust indenture upon Moody's action downgrading the credit rating of Delta's long-term senior unsecured debt. Mr. Gallagher evaluated intercreditor risks and negotiated the commitment letter, term sheet & credit agreement amendment for a $1 million fee USAir As Agent, advised management of the necessity to provide security for its revolving credit in order to gain covenant relief & financing flexibility in the aftermath of the 1991 Gulf War. Mr. Gallagher modeled the financial covenants, evaluated collateral values & indemnification risks, negotiated the amendment & fleet mortgage and successfully sought the approval of a majority of bank participants for transaction fees totaling $1.2 million
  • A.10 Risk Management USAir / Shared National Credit Program As Agent, Mr. Gallagher met with Federal Reserve Bank examiners to assess USAir’s creditworthiness, probability of default, collateral as a secondary means of repayment and the risk of loss during the annual review of syndicated loans Woodward & Lothrop / Alfred Taubman As a Lead Bank, Mr. Gallagher assessed Mr. Taubman’s personal guarantee to secure Retailer Woodward & Lothrop’s seasonal inventory line of credit by analyzing his balance sheet & the underlying assets which were highly leveraged & relatively illiquid ahead of the IPO of Mall REIT Taubman Centers Integrated Resources As both an Agent & a Lead Bank, Mr. Gallagher raised concerns about the Real Estate & Annuity syndicator’s increasing cash outflows while reporting slowing profit growth during the annual review & credit extension process just prior to the company declaring a debt moratorium and its subsequent bankruptcy & liquidation
  • A.11 Academic Background BOSTON COLLEGE, CHESTNUT HILL Bachelor of Arts Degrees in Economics & History, 1983 - 1987 - Gasson Scholar: The 30 most distinguished members of Freshman class - Ignatian Scholar: Cited for Academic Excellence - Educational Policy Committee: One of 4 Student Representatives - University Relations Office: Administrative Assistant writing fundraising speeches REGIS HIGH SCHOOL, NEW YORK Jesuit high school which all students attend on full scholarship, 1979 - 1983 Chase Manhattan Bank Corporate Credit Training Four month program of Financial Risk Analysis & Cash Flow Lending, 1987 - 1988 Boeing Airplane Evaluation Seminar, July 1993 Series 7 & 63, passed Level II CFA
  • A.12 Personal Background Matrimony, 1993 - Barbara (nee Bucher) - William born ‘98, Mary Anne born ’01 Citizenship - US by Birth - EU via Marriage Volunteering - The Leukemia & Lymphoma Society Westchester/Hudson Valley Chapter - Youth Baseball New Rochelle Larchmont Shore Club, Member Tennis, Biking, Skiing
  • Contact Information Peter Gallagher (914) 833-1427 (914) 391-0498 Cell gallagher.peter@verizon.net AOL IM: TopGunGallagher