Financial Training Training

Restructuring Problem Credits

Duration

2 day

There is a mix of theory and practice with the emphasis on “hands on” learning. Delegates will require laptops to utilise various models which will assist in the analysis of the various case studies.

Course Agenda

DAY 1

Session One

The current corporate restructuring climate

• Review of the current problem sectors
  • What are the recurrent themes?
  • Sector specific problems involving restructuring
  • Suggested solutions for different sectors including commodities, energy, FIs and insurance
• Restructuring framework
  • Proactive
  • Defensive
  • Distress
• Typical financial structures and products used to finance companies in leveraged transactions
• Review of the key issues in corporate restructuring
  • Liquidity or viability problem?
  • Identification of key stakeholders
• Leveraging and deleveraging
  • Optimising the leverage structure
  • Adjusting the cost of debt and equity for leverage
  • Recaps, debt and equity buybacks

Group Exercise: calculating the optimum leverage and debt capacity.

• What can we learn from previous economic downturns?
• Syndication problems
  • Monitoring performance as a syndicate member
  • Rights to act under the syndication agreement
  • Problems of agent bank versus syndicate members
  • Non repayment events and dividend issues regarding facilities

Case Study Example: A step by step approach to the restructuring of a multinational corporate during recessionary conditions and the resolution of problems which arose during this process.

Session Two

The leveraged loan fallout

• Product features of leveraged loan structures and restrictions this places on restructuring options
  • ABC notes, second lien, PIKs
  • Warrantless and warranted mezzanine debt
  • High yield bonds
  • Warrants and equity enhancement
• Covenant problems
  • Covenant loose, or hybrid covenant deals
  • The growth of non-bank lenders in leveraged deals
  • Underlying concept of a “restricted” group
  • Mulligans, snooze or lose and yank the bank clauses
  • Incurrence
  • Standstill agreements and role of syndicate members
  • Traditional leveraged senior deal change of control triggers versus a classic high yield bond deal

Case Study Example: Identifying the restructuring options for a US leveraged transaction in the
current economic climate.

DAY 2

Session One

What are the distressed corporate assets worth?

• Market price versus future value
• Review of main valuation methods and identification of the most useful methods for distressed assets
  • Cashflow methods
  • Multiples and relative value
  • Option based approaches

Case Study Example: Valuation of a current distressed asset situation in Europe.

Matching the solution to the problem

• Fix the financing
  • Debt-equity swap, restructure debt, sell assets, raise new equity
• Fix the business
  • Sell businesses
  • Outsource
• Fix the management
  • Change of control or ownership – what premium is there?
• Bankruptcy and reorganisation
  • Liquidation, sale or debt restructure
  • Legal reorganisation
  • Role of vulture funds
  • Impact of legal jurisdiction upon reorganisation options

Case Study Example: Identifying the problems in an international restructuring and proposing a plan to solve the key issues.

Legal issues in international restructuring

• Documentation requirements
• Gaps in documentation
• Legal options
  • Differences across different regimes
  • Legal reorganisation
  • Stakeholders with special interests – suppliers, pension trustees, leaseholders, etc
  • Liquidation, sale or debt restructure
  • Role of vulture funds

Session Two

Managing the debt problems

• Identifying solvency problems as opposed to liquidity issues
  • Stakeholder objectives
  • Restructuring framework; proactive, reactive and distress
  • What have we learnt from previous economic downturns?
  • What are the recurrent themes?
  • Non performing lenders in RCFs
  • Obligation to pay commitment fees to non-performing lenders
• Remedial business plan
  • What are the distressed assets worth?
  • Addressing the operating problems
  • Obstacles to a financial restructuring
  • Objective of parties in a restructuring – London Rules
  • Cash management – headroom in a revolving credit line, providing cash to continue trading
• Exit options
  • Sale of debt in the secondary loan market
  • PE buy back of debt
  • Equity rights issues
  • Use credit default swaps to hedge exposure
  • Conversion of debt to equity using swaps

Case Study: Example of selecting an appropriate exit option in a restructuring situation

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