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Who should attend
Credit risk managers, bond and mezzanine and equity investors, lending bankers, and other finance professionals working in credit risk management and problem loan areas, including restructuring, work-outs and special care units.
About the course
The purpose of this course is to identify the key analytic, structuring and restructuring lessons to be learned from deteriorating/failed credits. This is a highly interactive course where case studies and exercises are used to reinforce key learning points.
Key Learning Outcomes:
- Understand the role of covenants in credit management and crisis situations
- Understand the process for managing exposures to a company in distress
- Discuss the business and operational decisions required in order to place its business on a more solid foundation
- Assess the available options to lenders / investors, compare likely recovery against other alternatives and the current market price of the company's debt, where applicable
- Identify the restructuring alternatives, evaluate the possible choices and select the most appropriate restructuring solution, exit and/or workout options for companies in distressed situations.
Introduction / revisit the four-step analytical approach and evaluate the strengths and weaknesses of debt structures in protecting lenders / investors when a company reaches crisis point.
- Purpose: identify the borrower and where the assets and cash flow are
- Risks: macro, sector, business and financial, management and owners
- Debt profile: amount, currency, tenor, drawdown and repayment
- Ranking: legal, structural, and effective
- Covenants: predictive qualities of standard leverage loan covenants
- Credit pricing and recovery rates.
Managing exposures to a company in distress: the short term crisis management and the medium term business revisions required to manage the situation.
Triggers to distress
Liquidity crunch / Refinancing difficulty
- Defining insolvency
- Jurisdictional considerations
Exercise: Covenant breach and actions taken
- Management response to covenant breaches
- Exercise: Exchange offers
- Options for lenders
- Potential parties to a restructuring
- Appointment of external advisors
- Cash management
- Majority decision issues
- Establish and certify the company's going concern status
- Responsibility of directors
- Recovery rates
US models: Chapter 11 (reorganisation) and Chapter 7 (liquidation)
Exercise: Impact of Chapter 11 on Global companies
Overview of EU Insolvency Regulation
- Establishing centre of main interest (COMI) and secondary proceedings
- Summary of insolvency procedures in UK, Germany, France, Spain
Exercise: Jurisdiction selection for insolvency proceedings.
Remedial Business Plan
Evaluate the key business and operational decisions required by the company in order to place the business on a more solid foundation.
- Identify underlying cause for the need to restructure
- Over indebtedness
- Operational issues
- Determine a sustainable EBITDA
- Assess viable level of debt
- Overview of valuation methods: multiples, discounted cash flow or asset valuation
- Obstacles to restructuring.
Debt Restructuring Alternatives
- Examine the available options, compare likely recovery against other alternatives and the current market price of the company's debt, where applicable
Exit Options for the Lender
- Sale of exposure, hedge (CDS, credit insurance)
- Negotiate: waive covenants, debt / equity swap, debt / debt swap, amend and extend
- Accelerate: enforce, bankruptcy filing
- Cost of financial distress
- Cyclicality on firm values
Illustration Case Study:
Identify the pros and cons of the restructuring options presented.
Quantify potential recovery for creditors
- Relative claims and negotiating positions creditors
- Stakeholders with special negotiating positions
- Claims are not pro-rata
- Intercreditor agreements and terms
- Impact / influence of distressed / vulture funds on restructuring alternatives
- Cram down rights: forcing confirmation of a plan over the objections of dissenting classes e.g. shareholders with voting rights.
Final Case Study:
Participants will work in groups to apply the key concepts learned during the two-day workshop and apply these to a real restructuring situation.
Videos and materials
Because of COVID-19, many providers are cancelling or postponing in-person programs or providing online participation options.
We are happy to help you find a suitable online alternative.