What the Survivors Did Differently

‍The Evidence

Frameworks and playbooks are only as credible as the evidence behind them. This final post looks at what companies and allocators actually did during prior dislocations. It also includes the case that simplified risk-management narratives often omit: a company that acted early and still failed. Both sides of the evidence matter.

Ford Motor Company, 2006: The Decision That Preserved Optionality

In late 2006, Ford raised approximately $23.5 billion through a financing package that included roughly $18 billion of secured bank facilities. To do it, the company pledged a substantial portion of its automotive assets, including major operating assets and valuable intellectual property.

The decision was not a prediction of the financial crisis. It was a practical recognition that the capital markets would not always remain open to an automaker with Ford’s credit profile. Securing liquidity while lenders were willing to provide it was expensive. Losing access to liquidity later would have been more expensive. ‍

Two years later, GM and Chrysler entered bankruptcy restructurings supported by tens of billions of dollars in federal assistance. Ford avoided the same TARP-funded rescue. Its earlier financing decision preserved the runway to restructure on a different timetable, close underperforming plants, and renegotiate labor agreements on its own terms and its own timeline.

The lesson for the current cycle: the refinancing window for 2027 and 2028 maturities is open right now. The premium for refinancing early can function as a form of insurance against a narrower market window later. Companies that wait for better terms are making a bet that terms will improve. That is a bet on market conditions, and market conditions in a presidential election year with structural CLO demand rolling off are not something anyone can predict with confidence. ‍

JPMorgan, 2006 to 2008: What the Decision Actually Cost

Through the Cycle examined how Jamie Dimon’s preparation held up behaviorally — how pre-built systems allowed JPMorgan to stay calm while competitors were drowning. The question worth asking here is different: how did that architecture hold up against the organization’s own incentive structure pulling in the other direction?

JPMorgan materially reduced its subprime exposure in 2006. In its shareholder communications, the bank later noted that it had sold almost all of its 2006 subprime mortgage originations and substantially cut back its exposure before the crisis intensified. ‍

For two years, the more conservative posture carried a visible opportunity cost while competitors continued generating revenue from riskier housing-related activity. The bank’s trading desk lost revenue relative to peers. Analysts publicly questioned whether Dimon was being too conservative. The opportunity cost was not abstract. It showed up in quarterly earnings, in compensation discussions, and in the performance metrics that the board reviewed.

That is the real test of pre-commitment. The decision that protects you during a crisis will look wrong — measurably and publicly wrong — for an extended period before it looks right. If your governance structure does not have the tolerance for a decision that underperforms for two years before it pays off, you do not have the governance structure for pre-commitment. You have one that will override the playbook at the first sign of relative underperformance.

Dimon could sustain the position because he had the CEO seat and the board’s trust. A portfolio manager at a fund with quarterly LP reporting and annual performance benchmarks faces a different calculus. The architecture has to account for the incentive structure, not assume it away. ‍

J.C. Penney, 2019 to 2020: When Preparation Is Not Enough

This is the case the thought leadership industry avoids because it complicates the narrative.

In March 2018, J.C. Penney took steps to extend its runway, including tender offers for portions of its 2019 and 2020 notes and the issuance of $400 million of secured second-priority notes due in 2025. The preparation was proactive. Management secured breathing room while the capital markets were still open.

It was not enough. By mid-2019, the company had hired debt restructuring advisors. By May 2020, the company entered Chapter 11 with approximately $4.9 billion of debt outstanding.

The lesson is not that preparation is useless. It is that preparation can buy time and preserve options. It cannot, by itself, repair a deteriorating business model. Ford’s underlying product, vehicles, retained demand through the crisis. J.C. Penney’s underlying product, in-store retail, was being structurally disrupted before the pandemic, and the pandemic accelerated the disruption beyond what any refinancing could absorb.

This is why kill criteria matter as much as refinancing strategy. J.C. Penney’s management and lenders could see the secular decline in department store traffic. The refinancing bought time. A predefined kill criterion could have forced an earlier strategic-alternatives process, when the company had more time and potentially more optionality.

The question for your portfolio is not just “can this company refinance?” It is “if this company refinances successfully, does the business model support the debt at the new rate?” If the answer is uncertain, early refinancing is buying time, not solving the problem. Know the difference.

Shell, 1971 to 1973: The Advantage Was Preparation, Not Prediction

Shell’s scenario planning in the early 1970s is one of the most cited examples in risk management. The operational details are worth examining for what they reveal about execution speed.

Pierre Wack’s planning team did not predict the 1973 oil crisis. They did not have perfect foresight. Shell had already examined the implications of a major supply shock and had developed a shared decision framework before the embargo arrived. When the embargo hit in October 1973, Shell’s advantage was not information. Every oil company had access to the same geopolitical intelligence. The advantage was that Shell had already made the decisions.

Shell’s scenario-planning work became a frequently cited example of how an organization can respond more effectively to a discontinuity it did not precisely predict. The margin between Shell and its competitors was not analytical superiority. It was response time. Shell executed in days what took competitors weeks or months to deliberate.

For this cycle, the parallel is direct. The firms that will navigate the 2028 wall best are not the ones with the best models of where spreads are going. They are the ones that have already decided what they will do at various spread levels. The scenario planning is the work. The crisis is just the trigger.

Berkshire Hathaway, 2007 to 2009: What Deployable Capital Actually Means

Berkshire Hathaway entered 2008 with approximately $37.7 billion in cash and cash equivalents. That was capital held aside and ready to deploy when others could not. During the crisis, Berkshire invested $5 billion in Goldman Sachs perpetual preferred stock with warrants and $3 billion in GE perpetual preferred stock with warrants. These terms were not available to any firm that carried refinancing pressure of its own. They existed because Berkshire was the last buyer standing with both the capital and the credibility to write the check. ‍

But the more interesting lesson is what Berkshire was not doing in the years before the crisis. It was not chasing yield in structured credit. It was not leveraging into the housing market. It was sitting on reserves that earned modest returns while its competitors generated higher yields on capital that turned out to be impaired. The cost of holding deployable capital is opportunity cost, and that cost is visible every quarter until the moment it is vindicated.

The application to the current cycle: credit allocators should define reserve capacity explicitly rather than treat fully invested status as a default virtue. The appropriate level will vary by mandate, liquidity profile, and liability structure. The central question is whether the portfolio retains enough flexibility to act when post-stress opportunities appear. As a starting-point heuristic, some portfolios may choose to preserve 10 to 15 percent of deployable capacity, subject to mandate and liquidity constraints.

The Pattern

Across these cases, the pattern is consistent, but not what the standard narrative suggests.

Early action did preserve optionality. Dimon in 2006. Mulally in 2006. Wack in the early 1970s. Buffett throughout the 2000s. But the critical variable was not that they moved early. It was that they controlled the institution. Dimon had the CEO seat and the board’s trust. Mulally had CEO authority and a board aligned with long-term restructuring. Wack was leading a planning function that had institutional buy-in. Buffett controlled both capital allocation and share-holder communication.

The companies and allocators that navigated dislocations well were the ones with governance structures that aligned individual and collective incentives. For most mid-market portfolios, that alignment does not exist. Early action is only possible if your co-investors, management, and LPs have already accepted that losses will be recognized early. If they have not, no playbook will change that. The system is not broken—it is working as designed for the people running it.

Preparation did impose a visible cost before its value became clear. JPMorgan lagged competitors. Ford pledged its brand name. Shell invested in planning with no immediate return. Berkshire earned below-market yields. The cost of preparation was real, measurable, and embarrassing until it was vindicated.

Pre-built decision frameworks reduced improvisation under stress. Less improvisation under stress. Faster execution. More room for judgment where it still mattered. J.C. Penney provides the necessary caution: refinancing can buy time, but it cannot repair a deteriorating business model. Know whether you are solving a financing problem or a business problem. The playbook is different for each.

What Actually Determines Outcomes

The 2028 refinancing window is open. But the objective is not to predict the exact moment it narrows. The objective is to be positioned to act when others cannot.

If you control the capital and decision authority—if your structure aligns your incentives with early action—formalize your triggers now. Build the playbook. Document the protocol. Push through resistance during calm.

If you do not control both capital and decision authority—if your co-investors, LPs, or governance structure reward delay—accumulate dry powder and conviction instead. When the refinancing window narrows, the organizations that win are the ones with both capital and optionality, not the ones with the best playbooks. You cannot execute against your own incentives. But you can position yourself to deploy when others are constrained.

The companies that came out stronger from past dislocations were not smarter. They were not better analysts. They were earlier, and they had the structural optionality to act on what they saw. That is the lesson worth taking.

If you want to discuss how any of this applies to your specific portfolio, reach me directly at tamika@tamikatyson.com.

Sources

Dimon, Jamie, JPMorgan Chase Annual Shareholder Letters, 2006-2009.

Hoffman, Bryce G., American Icon: Alan Mulally and the Fight to Save Ford Motor Company, Crown Business, 2012.

Wack, Pierre, “Scenarios: Uncharted Waters Ahead,” Harvard Business Review, September 1985.

Buffett, Warren, “Buy American. I Am Betting On It,” New York Times, Op-Ed, October 16, 2008.

Buffett, Warren, Berkshire Hathaway Annual Shareholder Letters, 2007-2009.

J.C. Penney Company, Inc., Form 10-K, Annual Report, 2019.

In re: J.C. Penney Company, Inc., Case No. 20-20182, US Bankruptcy Court for the Southern District of Texas, May 2020.