Masterclass in Corporate Loan Restructuring

Euromoney Learning Solutions

How long?

  • 28 days
  • online

What are the topics?

Euromoney Learning Solutions

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Who should attend

This programme has been designed at an Intermediate level, requiring an understanding of business credit and financial analysis expected of a lender with at least 2-3 years’ practical experience.

While it is suitable for those new to handling problem loans, in the current environment where bankers are handling the fallout from the pandemic, it is also relevant to all business & corporate relationship officers as well as their colleagues in the credit department:

  • Relationship officers/managers
  • Credit officers/managers
  • Workout officers
  • Restructuring officers
  • New entrants to fund manager/private equity special situations & distressed debt teams

About the course

This programme demonstrates to participants how to reach win-win solutions when their medium- and large-sized business customers are unable to meet their commitments under credit agreements. The programme steers participants away from “band-aid” half-measures such as “extend and pretend” and “kicking the can down the road”. Participants will be encouraged to ensure that the root causes of the customer’s problems have been fully identified, with action plans implemented to address its strategic and operational challenges. Participants will be shown how to achieve buy-in from all relevant stakeholders, with solutions that are felt-fair – based upon equality of treatment within each stakeholder class, respect for the relevant company law/insolvency framework and maintaining the present value of exposures. The case studies used on this programme are all based on genuine real-life businesses, allowing participants to understand how and why the actual solutions were structured and consider what they might do differently to improve the outcomes.

Case studies

The following case studies will be employed, supported by vignettes where appropriate:

  • German automotive components firm
  • U.S. restaurant chain
  • U.S. “flag” hotel
  • Saudi consumer products distributor
  • U.K. parcels delivery business
  • G.C.C. producer of construction materials
  • U.K producer of biofuels

Join a cohort of ambitious learners with our fully online, self-paced certificate programmes

Led by industry experts in a modern, engaging and flexible format, these 4-6-week intensive programmes are design to develop real expertise, challenge your thinking, and build confidence. Built using our social learning platform, the Euromoney Masterclasses consist of weekly on-demand lessons with intermittent live interactive classes/Q&As with a Euromoney subject matter expert to discuss the latest modules and reinforce key takeaways.

Overall Aim

To enhance lenders’ recoveries from distressed debt situations and give firms the opportunity to return to viability, thereby supporting economies in their efforts to preserve sustainable businesses together with their employment and growth opportunities.

Agenda

Delegates wishing to take this course will receive their access from the date above. Materials will be provided on Euromoney's Social Learning platform, and will be a mix of weekly on-demand lessons with intermittent live interactive classes/Q&As with Euromoney Faculty to discuss the latest modules and reinforce key takeaways.

The course is designed to be primarily self-paced, but allows participants to meet and collaborate with fellow participants, learn from and speak to expert faculty, and access a wealth of learning materials.

WEEK ONE - A STRUCTURED APPROACH TO UNDERSTANDING THE PROBLEM

Topic 1 – A principled approach to the recovery of business lending

By the end of this topic, participants will be aware of the array of challenges encountered in negotiating out-of-court solutions and the need for a principled approach:

  • Definitions;
  • Distinguishing between "economic distress" and "financial distress";
  • Advantages and disadvantages of out-of-court versus in-court solutions;
  • Barriers to going concern solutions;
  • Restructuring principles

Topic 2 – A disciplined approach to handling technical and cash defaults

By the end of this topic, participants will appreciate the factors to be taken into consideration when faced with the choice of waiving/calling an event of default. Their analysis will be supported by a structured decision-tree:

  • Decision-tree approach to breaches;
  • Potential consequences of calling default;
  • Where other lenders have cross-default clauses;
  • Where other lenders have cross-acceleration clauses;
  • Whether the breach is temporary or structural

Topic 3 – Introduction to the key restructuring tools and techniques

By the end of this topic, participants will be aware of many of the key techniques to be addressed throughout the programme through presentation of a case for which the trainer developed the financial restructuring:

  • Practical use of independent business reviews to improve our information base, assisting in root cause analysis and how to address the business’ problems;
  • The critical importance of the right management and how to ensure their appointment;
  • The need for restructurings to be fully-integrated;
  • Equitable treatment, preservation of PV and how the instruments can be engineered to deliver this;
  • Tailoring debt service to expected cash flows;
  • Evaluation of exit options, and
  • The importance and types of controls during restructuring period.

Topic 4 - Root cause analysis as the basis of our potential solutions

By the end of this topic, participants will be able to conduct a structured analysis of what led to the firm's distress and what needs to be done to address such issues. This is of critical importance because, for a financial restructuring to be feasible, we must first ensure that the underlying causes have been fixed:

  • Define the problem;
  • Gather information, data and evidence;
  • Identify all issues and events that contributed to the problem;
  • Determine root causes;
  • Identify recommendations for eliminating or mitigating problem recurrence;
  • Implement the identified solutions   WEEK TWO - SETTING UP A SUCCESSFUL TURNAROUND

Topic 1 – How to manage multiple lender situations

By the end of this topic, participants will be aware of the potential conflicts and complexities implicit in multi-lender restructurings, and how the divergent interests can bet be managed:

  • Overview of the different types of lender and their priorities;
  • Different lenders' objectives and strategies;
  • London Approach/INSOL 8 Principles;
  • Co-ordinating committees, their appointment/objectives/rights/objectives/management;
  • Appointing advisers

Topic 2 – The design and negotiation of Standstill/Forbearance/Moratorium Agreements

By the end of this topic, participants will understand when to concede payment moratoria to their borrowers and how such should be structured to both mitigate the risk of lost time and enhancing potential returns from the solution:

  • Objectives;
  • When is a standstill (in)appropriate?;
  • Structuring the standstill agreement;
  • What should happen during a Standstill period?

Topic 3 – How to enhance our information base

By the end of this topic, participants will be aware of the inadequacies of the existing information at their disposal as a base for considering whether to support an out-of-court solution. They will be able negotiate with management for the completion of independent business review based upon a terms of reference tailored to the specific situation:

  • In what circumstances do we require an IBR & what are the alternatives?;
  • Selecting the right consultant and reporting lines;
  • Responsibility for payment of fees and co-operation with consultant;
  • Topics frequently covered in IBR;
  • Drafting the terms of reference;
  • Linking consultant's appointment with the Standstill;
  • Using the IBR outputs

Topic 4 – Considering the need for enhancements to management and the appointment of a Chief Restructuring Officer ("CRO")

By the end of this topic, participants will be able to negotiate with management for the appointment of suitably qualified individual/firm that will relieve some of the work pressures and lead the firm through a successful turnaround:

  • Rationale for appointment;
  • Candidate selection;
  • Appointment process;
  • Reporting lines;
  • Fee structure;
  • Developing firm objectives/deliverables within terms of reference;
  • Engagement letter;
  • CRO clause within standstill agreement

WEEK THREE - ASSESSING SUITABILITY OF A GOING CONCERN SOLUTION

Topic 1 – Assessment of the potential of the firm to return to viability

By the end of this topic, participants will have a framework for evaluating whether the distressed firm has a reasonable prospect of returning to viability and is thus worthy of support in a going concern restructuring:

  • Analysis of industry prospects;
  • Position of the firm within its sector and extent of any sustainable competitive advantage;
  • The strength of the business’ key customers/groups of customers – as a source of future revenues and underpinning the quality of the debtor portfolio (both vital producers of cash);
  • The strength of the business model and whether this is fit for purpose;
  • Strength of management;
  • Analysis of management's recovery plan;
  • Assessing the risk from other stakeholders’ claims and how to manage these

Topic 2 - How the relevant insolvency framework shapes our restructuring activities

By the end of this topic, participants will be aware of the key components of insolvency frameworks and how these shape the development of recovery solutions:

  • Determining which member state has jurisdiction; EU Insolvency Regulation; centre of main interests (“COMI”); main proceedings; territorial proceedings;
  • Flexibility of the system;
  • Hardening periods;
  • Actions re. fraudulent transfers and preferences;
  • Actions re. equitable subordination;
  • Rescue proceedings/Liquidation options;
  • Who runs the business and makes key decisions?;
  • Personal liability of directors;
  • Lender liability;
  • Shadow directorships and differing perspectives by jurisdiction;
  • Cram-downs;
  • Preferential creditor claims;
  • Pre-packaged solutions;
  • Jurisdictional differences

Topic 3 – Constructing and evaluating insolvency/outcomes models

By the end of this topic, participants will be able develop models estimating the return to all levels of stakeholder from each of the recovery solutions under consideration and appreciate their use in guiding the final workout solution:

  • Estimating asset values under each option;
  • Allocating cash distributions according to the absolute priority rule/ relevant company law and insolvency framework/structural and contractual subordination;
  • Identify where the value breaks, which are the impaired classes and who is in a position to control the outcomes;
  • Introduction to, and application of, decision frameworks

Topic 4 – Valuing the distressed firm and its assets

By the end of this topic, participants will be able to perform a business valuation taking into consideration the additional challenges inherent in distress:

  • Illogicality of going concern assumptions implicit within DCF and relative value approaches;
  • Trade-off between fair market value and urgency of need for cash from disposals;
  • Problems inherent in adjusting DCF for probability of distress;
  • Problems of absence of market parameters/comparables;
  • Latest techniques;
  • Valuing intangibles;
  • Specifics relating to licensing agreements

Topic 5 – Distressed debt investors as a potential exit

By the end of this topic, participants will be able to make the calculations of the weighted return typically performed by distressed debt investors:

  • Developing assumptions for upside/base/downside cases within our forecast model;
  • Analysing cash flow, liquidity and financial covenant tests under each case;
  • Estimating asset value under each case;
  • Constructing a cash waterfall under each case;
  • Calculating yield to maturity for each;
  • Applying probabilities to the outcomes to arrive at a weighted return

WEEK FOUR - TAILORING & IMPLEMENTING THE SOLUTION

Topic 1 – Designing the financial restructuring

By the end of this topic, participants will be able to negotiate a restructuring term sheet tailored to the operational and strategic restructuring of the borrower:

  • Considerations when developing proposals;
  • Assessment of debt capacity;
  • Sources of cash (e.g. operations, asset disposals, new equity);
  • Cash waterfalls and committed debt service;
  • Structuring performance-based incentives;
  • Situations where debt relief is/is not appropriate;
  • Controls during restructuring period, and
  • Controls post-restructuring date.

Topic 2 - How to ensure that the lender achieves an appropriate risk-adjusted return

By the end of this topic, participants will be able to structure transactions providing an appropriate return for risk against the constraints of the borrower’s ability to pay, rewarding the lender for co-operating in time-consuming solutions with higher than desired risk profiles:

  • Estimating the lender's risk-adjusted return on capital on origination;
  • Calculating how far the risk-adjusted return has deteriorated;
  • Techniques for closing the pricing gap: fees (waiver/restructuring/success/deferred financing) PIK interest; roll-up; warrants; participation fees;
  • How to determine whether the projected returns are "fair" to each relevant stakeholder

Topic 3 – Debt for Equity swaps as a viable restructuring technique

By the end of this topic, participants will be aware of the key features of a debt to equity swap and how this technique can be structured as a viable restructuring solution:

  • Circumstances in which a Debt for Equity swap can be a viable solution;
  • The mechanics;
  • How much debt should be written-off?;
  • How much equity should the lender be given?;
  • Which class(es) of equity should be used?;
  • Structuring the converted equity instrument;
  • Managing the converted investment;
  • Planning the exit;
  • Accounting considerations;
  • Regulatory concerns

Topic 4 – Choosing among recovery options

By the end of this topic, participants will be able to select the optimal choice among the competing recovery options:

  • Which returns the best present value?;
  • Relative complexity of each option;
  • Cost to achieve each option;
  • Relative probabilities of success;
  • Range of possible outcomes

Experts

Adrian Grant

Adrian brings over 30 years’ experience in banking and financial services to a highly interactive approach to training & facilitating learning interventions. Key roles in his financial career included: VP Loan Workout for Lloyds International Corp., New York; Senior Consultant and Team Leader...

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Masterclass in Corporate Loan Restructuring at Euromoney Learning Solutions

From  1995 GBP$2,686

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