Cygnus Pay Cuts: Taking a BIG One for the Team

I know very little about what is going on inside Cygnus right now: all I know I read in Folio and what was written to me in an email from someone within the company. I don’t know how much money this move will save them, or how close to the abyss (not making a payment to creditors) the company was or is. Nonetheless, I will offer my opinion.

- The article, by Tony Silber and Bill Mickey, Folio’s publisher/editor and one of its most senior correspondents, respectively, quoted an anonymous source from outside the company who said:

”While busting a bank covenant is never a good thing, it is not uncommon or traumatic for private companies,” the second source said. “Bank amendments occur all the time with lenders who cooperate with management to get through difficult times. It is hard to imagine that the CEOs and/or ABRY are willing to make the company go through this trauma in order to avoid the modest costs and pain of a bank amendment.”

I give ABRY and Carr/O’Brien (Cygnus’ co-CEOs) a bit more credit than that. They are not business neophytes. Theay know how borrowing goes, and ABRY has considerable experience living on the edge with Penton. This unusual move is not one that they would make without considering other options, including the initial steps towards bankruptcy.

- The one bit of information that my secret source within the company gave me that wasn’t in the Folio article was that the managers of the company had supposedly agreed to take a 25% “or more” pay cut. I’m not sure how this part of the deal is being structured, but I do not think that a 25% or even 35% pay cut by very senior management is comparable to a 7.5% cut for the rank and file.  Let’s engage in a thought experiment….

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