NEW YORK — Blackstone Group's Timothy Coleman helped Ford avoid bankruptcy and a taxpayer bailout when the automaker eliminated $9.9 billion of debt and negotiated with unions to modify collective-bargaining agreements.
Now he may be trying to turn around Kansas.
Coleman, who heads restructuring at Blackstone, has met with Gov. Sam Brownback to discuss being hired as the state's adviser, according to three people familiar with the discussions.
Talks focused on how Kansas — where the deficit for the next fiscal year is $492 million — could sell assets, streamline operations and downsize its government, said the people, who asked not to be named because the discussions are private.
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Brownback, a Republican, took office in January seeking to revamp Medicaid, public-school financing and state regulations. The November elections brought to office 28 new governors who, like Brownback, may look to corporate-restructuring experts as they move away from piecemeal changes such as job cuts to a more sweeping approach to retooling their states.
"These governors are talking about restructuring on an unprecedented scale," said Jonathan Henes, an attorney at Kirkland & Ellis, which advised on the bankruptcies of Visteon Corp. and Solutia Inc. "States will need to pay market rates for expert restructuring advisers, but the potential for fixing the fiscal issues is huge, and with restructuring advice you get what you pay for."
A Blackstone spokesman, Peter Rose, declined to comment on talks with Brownback's office.
The firm, hired in January 2009 by Ford, advised the company as it negotiated with the United Autoworkers to modify a 2007 collective-bargaining agreement and reduce borrowings through a debt exchange and tender offers, according to Blackstone's website. Ford was the only major U.S. automaker to avoid Chapter 11 and a taxpayer bailout.
"Everyone recognizes that states need to balance their budgets and that they have extreme issues they're looking at," Coleman said in an interview earlier this week.
Brownback had a two-hour meeting with Blackstone in the governor's office on Jan. 25, according to a copy of his schedule obtained through a public-records request. Blackstone has said it won't work on issues related to state employee pensions, one of the people familiar with the discussions said.
States project combined budget deficits of $125 billion in the coming fiscal year because revenue hasn't bounced back from the recession and spending on unemployment and Medicaid swelled. States and local pensions have an unfunded liability gap of as much as $3.6 trillion, according to an October study by economists from Northwestern University's Kellogg School of Management and the University of Rochester.
Brownback has proposed eliminating or moving eight agencies, such as the state parole board and the agency that runs Medicaid. The moves would save $9.2 million. Among the state's assets is the 236-mile Kansas Turnpike, which Goldman Sachs Group said in 2006 could be sold for as much as $3.15 billion.
At the request of the Legislature, Kansas's Department of Administration compiled a 195-page list of all land and building assets owned by the state. The list, which was released in November, includes armories, ballparks and university research facilities.
"The governor has met with lots of folks about restructuring during the transition, and he has presented a number of reorganization orders on how to restructure state government in Kansas," said Sherriene Jones-Sontag, the governor's spokeswoman, without commenting specifically on any meetings with Blackstone.