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(ANTHONY JENKINS FOR THE GLOBE AND MAIL)
(ANTHONY JENKINS FOR THE GLOBE AND MAIL)

the lunch

Newton Glassman, a private man in the stressful world of private equity Add to ...

Newton Glassman has spent the past 11 years running hard to build what has become Canada’s second-largest private equity firm.

Now he’s starting to think about slowing down, at least a bit. It’s not just because of the injured leg that has him thumping toward a booth at the Chase, Toronto’s hottest financial district restaurant, with a cane and a walking boot to protect an ankle injured in a water-skiing accident. He is spending more time pondering charity and life outside work.

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Mr. Glassman’s firm, Catalyst Capital Group Inc., now runs $4-billion of assets that it mostly puts to work in messy distressed situations, trying to take control of struggling companies and turn them around. At the moment, Catalyst is probably most visible in the wireless wars, fighting a running battle with other creditors of bankrupt wireless provider Mobilicity and seeking to be a player in creating a new cellphone service provider to compete with the likes of BCE Inc. and Telus Corp.

It also played a role in the restructurings at CanWest Global Communications Corp., where it made a huge return, and Stelco Inc. Its portfolio includes everything from casinos to restaurants to a biotechnology company.

Investing in distressed debt is a gritty, confrontational business. Mr. Glassman's firm typically buys bonds issued by a troubled company, spending countless hours searching for the securities that will provide the most influence, then tries to gain control when the company is restructured. The goal is to buy in cheap, seize power if necessary, fix the business and reap the rewards. It can be a rough job, because there is rarely enough money to go around and someone usually loses out.

Faceoffs over failing companies have earned Mr. Glassman a reputation as a pit bull negotiator. He acknowledges that he is the last to shy away from a scrap, and that’s why he is suited to do what he does.

“You have to be unaffected by conflict to be decent at distressed because it’s a highly adversarial process,” he says. “You have to have extraordinary commitment to your view, both ethically and professionally, because you are dealing with desperate people and desperate people try desperate things. You have to have a commitment to your sense of what is right and wrong. And you can’t waver from it.”

Yet, his reputation is a bit hard to square with the soft-spoken man who has a touch of the cherub in him even at 49, who is reclining to prop his bum leg up on the banquette, keen to talk about his love of kids and sports and the fact that he is a “water baby.” He’s attired in a charcoal suit, a white and black checked shirt and a black tie, with a slim Patek Philippe timepiece on his wrist. His black eyeglasses frame a youthful face with rounded contours.

Speaking of faces, Mr. Glassman’s is not well known to very many. He has a standing no-pictures policy – declining even to provide a photo from which The Globe and Mail’s artist could create a rendering. That guy up in the drawing above, he’s just a generic business type.

However, the low-profile act can’t last forever, not when he has created a firm that some back-of-the-envelope calculations show could be worth something like $1-billion, and that plays in some of the more interesting deals in Canada.

Mr. Glassman is also looking at ways to give away most of his money, and his name is starting to pop up in recognition of that. For example, the neonatal intensive care unit [NICU] at Toronto’s Sunnybrook Health Sciences Centre now bears his name.

After settling on a fresh mozzarella salad for an appetizer and albacore tuna for the main, Mr. Glassman begins to explain how he went from studying law to the world of private equity.

After law school at the University of Toronto, he knew he didn’t want to be a lawyer. He went to business school at Wharton, graduating in 1990, then took a job at a merchant bank in Toronto. He shunned New York because he wanted to be close to his sister and his newborn nephew. Before he started his new job, he decided to go on safari to photograph animals, “with the view that I was not going to have a vacation again for a very, very long time.”

He returned to a voice mail summoning him to a meeting at the firm, where he found out everyone was being laid off and he would be let go before ever working a day. The severance paid half his student loans, and he quickly found a new job at what was then one of the country’s more prominent private equity firms, Canadian Corporate Funding Ltd. It was there he gained his taste for distressed debt situations. He landed just in time for the recession of the early 1990s.

“The private equity side was in huge trouble. Because of my legal background and business school I fell into being heavily involved in working out portfolio companies and I fell in love with it.”

There were a couple more stops, including one turning around an auto parts firm. He eventually moved to New York-based Cerberus Capital, a giant in the world of distressed investments. He helped run telecom and oversaw Canadian investments. While there, he watched Cerberus grow massively. It taught him how a firm really operates, but also rubbed him the wrong way. He believed private equity firms should stay small, rather than trying to pull in as much in assets as possible to earn big management fees and, perhaps, big investment gains.

“It’s a privilege to be in this business. There is no other business like it in the world,” he said, pointing to the large potential profits. “My view is that doesn’t mean you can exploit it to the nth degree at the expense of investors. There is a limited scale and scope that anybody can run.”

He left Cerberus and wrote a business model for a new firm. As he launched it in 2002, he met a young executive from Mexico named Gabriel de Alba. A mutual friend was badgering Mr. Glassman to interview Mr. de Alba for a job at his new firm. Finally, he agreed. He grilled Mr. de Alba on an obscure telecommunications deal. He knew everything about it, and “literally took me to school.” Their partnership was sealed over a dinner at Morton’s steakhouse in Toronto.

Mr. Glassman now calls Mr. de Alba “the firm genius.”

In the early years, more money went out than came in. “Gabriel and I were writing cheques into the firm and funds and I was watching my chequing and savings accounts go to zero, literally get very, very close to zero for the first three years, four years.”

These days, with Catalyst firmly established, money is not an issue. Its next fund will be bigger than $1.25-billion, Mr. Glassman says, because the openings are increasing for distressed investors. (That’s good news for Catalyst. It’s less so for the rest of the country: “Canada is not doing as well as an economy as we’d like, as we’d hope. We’re seeing more opportunity.”)

With that success, a lot of time is spent not making money, but giving it away. He has help from what he calls “the two most expensive friends that anyone could ever have.” That would be developer Peter Gilgan and Tim Hockey, who runs Canadian banking at Toronto-Dominion Bank. They ride together in a cycling group called Les Domestiques, and spend time thinking about charitable work while in the saddle.

The group’s name is a sly joke for a group with a bunch of high achievers. In cycling, domestiques are the worker bees on a team who are charged with getting the team leader on the podium. They rarely get any credit.

“Being around guys like that, they force you to be a better person. And they also don’t let you get away with anything. They don’t care if you are a CEO or a homicide cop, who’s one of the guys who rides with us,” he says. “Everyone is treated equally. If you are at the back of the pack and slow going up a hill or a mountain, you are pretty much going to get verbally abused. And you should be.”

One of Mr. Glassman’s big focuses is on building neonatal intensive care units. He wants to help fund renovations across Ontario.

“If you walk through Sick Kids’ NICU today, it will absolutely break your heart. The province should be ashamed of itself. It looks like a 1970s Russian gulag. You have families, and preemies with very severe problems, sitting [around] an incubator in a hall. No privacy. The people who work there are incredible, how much they do with so little.”

Catalyst’s charitable arm also is building a knowledge centre that will work with universities to provide investors, lawyers and judges with more education about credit markets. Mr. Glassman has harsh words for the way credit markets sometimes work in Canada, as judges have sometimes upset the traditional order of restructurings.

In addition to cycling, he spends as much time as possible at his cottage in Muskoka, getting into the water whenever possible. Growing up, he swam competitively and taught water-skiing. These days, he’s passionate about surfing, which he tried for the first time in Costa Rica around eight years ago. Closer to home, he wake surfs – trailing behind a specially designed boat surfing the wave the boat throws off. “There is nothing like the first time you catch a wave and just ride,” he says.

One thing he still has on his list of things to accomplish is starting a family. He is trying to set up his life to make it possible. A few years ago, the firm added another partner, lawyer Jim Riley, as chief operating officer. Last year, Catalyst installed video-conferencing gear at Mr. Glassman’s cottage in Muskoka, as a test run to see how the firm would run if he were spending less time at the office. Between Mr. Riley and Mr. de Alba, “ I suspect I am becoming redundant which is a-okay by me,” he says.

“One of the problems of building a firm like mine is I may have not had the right priorities.”

When he was at Cerberus, founder Steve Feinberg warned him about the personal cost of building a firm, telling him: “There is a massive difference between being one of the key players and being THE guy in charge.”

Mr. Glassman says that at the time, he thought Mr. Feinberg was “just yakking.” But if he knew then what he knows now about building his own firm, he says he probably would have stayed at Cerberus. “The job of being the guy is if you take your responsibilities seriously, it is all encompassing.”

But he knows it may be nothing compared to one day raising a kid. “I love kids. Kids are the coolest. I suspect it will make building my firm feel like child’s play.”

========================================

CURRICULUM VITAE

Age: 49

Family: Single

EDUCATION

Undergraduate degree from University of Toronto.

Law degree from University of Toronto.

MBA from Wharton School of Business

CAREER

Learned the the business of dealing with distressed companies at Canadian Corporate Funding Ltd.

Managing director at Cerberus, where his specialty was telecommunications.

Founded Catalyst Capital in 2002.

OUTSIDE THE OFFICE

Surfing, wake surfing, swimming, water-skiing, cycling, skiing.

And his dogs, a pair of Weimeraners.

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Follow on Twitter: @boyderman

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