Newly appointed Qwest chief financial officer Oren Shaffer stood at a podium as a phalanx of testy bankers grilled him about the company’s last-ditch recovery plan.
How would Qwest cut its debt load to a manageable level?
How would accounting-fraud investigations of the company’s operations under former Qwest chief Joe Nacchio affect the company’s future?
Why should the banks agree to revise terms of a $3.4 billion loan again after being lied to in the past?
To allay bankers’ fears, Shaffer staked his personal reputation, built over 25 years at Goodyear Tire & Rubber Co. and more than five years at Chicago-based phone company Ameritech.
“Trust me,” he told the bankers.
At the time, Qwest had barely any cash reserves to offset its total debt of $26 billion. After reaching a record high of $64 a share in March 2000, Qwest stock was trading for less than the price of a gallon of milk.
Asked by one banker after the August 2002 meeting at the downtown Denver Marriott what his Plan B would be if the recovery plan failed, Shaffer replied: “There is no Plan B.”
The banks ultimately agreed to revise the loan terms – a reprieve that saved Qwest from bankruptcy and became one of the first important steps in a four-year journey to financial stability.
With his boss, chairman and chief executive Richard Notebaert, Shaffer has helped orchestrate a surprising corporate turnaround at Qwest.
Shaffer “is one of the most talented and most gifted financial minds that I have ever met,” said Bob Murley, chairman of investment banking for Credit Suisse First Boston, which was among the banks that revised Qwest’s loan terms.
Through a series of debt restructurings and cost-cutting measures, the Denver-based phone company has pared its debt load to $15.4 billion. The company has posted two consecutive quarters of profitability. Qwest stock is trading at a four-year high, hovering around $9 a share.
But Qwest is not out of the woods. Its land-line business continues to decline, losing
2 million subscribers over the past 2 1/2 years. Some analysts question the company’s strategy of connecting only certain neighborhoods with high-capacity fiber lines rather than building out an entire network like Verizon did to better compete with cable companies. Many analysts still rate the stock a “sell.”
Still, considering where the company was when Notebaert and Shaffer took over, analysts say Qwest’s recovery has been impressive.
“Qwest was in very dire condition when Dick and Oren took over,” said Jonathan Chaplin, a senior analyst with JP Morgan. “Among the investment community, very few people gave Qwest a realistic chance of bouncing back.”
While analysts say the company’s rebound has been aided by the company’s $7 billion divesture of its yellow-pages business, most observers also credit Shaffer and Notebaert for the recovery.
“In the absence of Dick and Oren being at the company, and the confidence that people had in them both personally and professionally, the banks would not have been willing to step up and provide the support that was needed,” said Murley, who has known Shaffer for more than 20 years.
Shaffer, 64, grew up in Sharpsville, Pa., a town of 4,500 residents about 70 miles north of Pittsburgh.
He worked as a cryptographer in the Army from 1962 to 1965, helping handle encrypted communications for the president.
It was in that assignment, Shaffer said, that he learned to absorb stress without outward signs of agitation. Working in this role at the White House, he said, he dealt with crisis on an “almost constant basis.”
After receiving a bachelor’s in business administration from the University of California at Berkeley, Shaffer joined Goodyear’s international division in 1968.
He spent 17 of his first 20 years with the company in Europe, most of the time in France.
Shaffer, who speaks French fluently, was named president and CEO of Goodyear-France in 1981. He was appointed CFO and a board member of Goodyear in June 1987.
Colleagues, friends and analysts describe Shaffer, who holds a master’s in management from the Massachusetts Institute of Technology, as down-to- earth and modest.
“He’s the kind of guy you can talk to and feel like he’s not ripping you off,” said Pat Comack, a telecom analyst who follows Qwest.
Shaffer unexpectedly resigned from Goodyear in 1992. Analysts speculated that he left because he believed he wasn’t the likely successor to then- CEO Stanley Gault. Shaffer had already been passed over for the company’s top job twice.
“There were a bunch of changes going on at Goodyear at the time,” said Hank Ruppel, a former Goodyear spokesman and finance manager who worked at the company for 25 years until 1995. “He was sort of stuck. Some other people had been moving up.”
Shaffer denied that his departure was related to the company’s succession plan. “I had done all I could,” he said, adding that he left because he wanted to take a break.
After Goodyear, Shaffer ran his own private-investment firm, Virgo Cap, until 1994, when Notebaert came calling.
From the start, Notebaert and Shaffer clicked.
As CEO of Ameritech, Notebaert was looking for a CFO.
“I don’t think it was more than 30 seconds into the conversation that I thought, ‘This works,”‘ Notebaert said.
He offered Shaffer the job during their first meeting.
After Ameritech merged with SBC Communications in 1999, Shaffer retired to Florida. Then history repeated itself in 2002 when the charismatic Notebaert came calling again, asking Shaffer to join him at Qwest.
“He’s been very complementary to Dick, both in his demeanor and execution,” said Comack.
Shaffer has a higher profile on Wall Street than most CFOs, often handling road shows on one coast while Notebaert is on another, analysts say.
“He’s very respected by equity holders and debt holders,” said Chaplin, the JP Morgan analyst. “It’s very difficult to keep both constituents happy at the same time. … That’s a huge testament to his skills as a CFO.”
For his part, Shaffer said he has no plans to retire as long as he’s still having fun.
“From the company’s point of view, there should be no concern,” Shaffer said.
Staff writer Andy Vuong can be reached at 303-954-1209 or avuong@denverpost.com.
Oren Shaffer
Age: 64
Born: Sharpsville, Pa.
Family: Wife, Evelyne, and two children, both born in Belgium
Hobbies: Golfing, hiking, snowshoeing
College: Bachelor’s from University of California at Berkeley, master’s in management from Massachusetts Institute of Technology
Career highlights:
- 1968-92: Goodyear Tire & Rubber Co., retired as CFO and director
- 1992-94: Virgo Cap, principal
- 1994-2000: Ameritech CFO
- 2000-02: Sorrento Networks, chief operating officer
- 2002-present: Qwest, CFO and vice chairman
2005 pay at Qwest: $2.7 million, which includes salary and bonuses, plus $1.625 million in stock-option grants
