Pick up the pieces
After the Sept. 11 attacks, Murdy was left with about $200 million
in debt and an economic downturn that was turning into a landslide. A situation like that can be overwhelming, but Murdy says
the first thing you need to do in such a crisis is develop a realistic
picture of the situation.
The fact that Comfort Systems USA had been preparing for an
economic slowdown helped the company’s leaders deal with the economy post-Sept. 11.
“Remember, the Internet bubble had started to burst, the economy had become way overheated and we knew that there was
going to be a downturn,” he says. “That’s why we looked at a high-yield financing. We knew we couldn’t squeeze any more out of the
business to pay down the debt.
“The events of 9/11 sort of punctuated that, but the world did not
end. I think we can tend to get overdramatic about this. We didn’t
think the company was going to fail necessarily.”
With the high-yield bond deal dead, Murdy and his senior leadership re-evaluated the company in an effort to find alternate ways
to cut away the debt. After rounds of discussion, the company’s
leaders came to the conclusion that the only realistic solution was
to sell off assets.
Murdy began contacting various companies, looking for potential buyers for the company’s union shops.
“There was a good amount of discussion about whether we
ought to sell these entities for cash, and I was in favor of it,” he
says. “I contacted the other company and had discussions about it,
devised a way to pay down our debt and get ready to weather what
was clearly a coming economic downturn. As it turned out, the
economic downturn on the commercial (HVAC) side was even
worse than I thought. A lot of people didn’t recognize that because
construction in general wasn’t that bad.”
Comfort Systems struck a deal to sell off all 19 of its union operations at once. Murdy says it was a difficult decision for the company as a whole, but it was a sound financial decision for both
buyer and seller. The deal allowed Comfort Systems USA to pay
off the remaining $200 million of debt in one move.
“We sold those (union operations) and paid down the debt,” he
says. “It was a very good deal for them and for us, all things considered, but some of those entities we sold are some of the best
mechanical engineering companies in the country, on the union
side of things. But that’s how we paid down the debt, and we’ve
been debt-free ever since.”