Sales revenue: $200M (two years before we came)
The situation: The company was unable to meet their debt obligations due to having previously expanded into multiple lines of business without a thorough study of feasibility and strategy, business, and financial planning. The company had neither a specific business strategy nor a suitable business model.
The company’s objectives and needs
- Advice and support to engage and work constructively with financial creditors (banks) to obtain their support and “breathing space,” which is necessary to allow the company to continue to trade while the company properly considers and assesses potential strategies and approaches to address the company’s current financial and operational difficulties.
- Identify and assess the viability of Financial/ Debt restructuring ‘solutions’ which recognize the current and forecast financial and operational position of the company;
- Advice and support to implement the preferred financial / debt restructuring ‘solution’ / strategies
The scope of work we’ve done:
Phase 1: Some main jobs in Independent Business Review (Bankruptcy analysis included)
High-level review of current business operations and business plans for the company and its entities for the last two years and current year; and provide comments on key project’s challenges in implementing business plans;
Review the company asset portfolio; nature of assets, location, recoverable value considerations, ownership structure and secured creditor rights;
Liability analysis; secured and unsecured creditor profile, repayment terms, legal or other action taken by creditors and progress of restructuring negotiations;
High-level liquidation (“base-case”) analysis; this includes working with third-party specialist asset valuers to obtain independent valuations;
Identify and quantify material intra-group relationships that impact the formulation of debt restructuring proposals.
Phase 2: Some main jobs of defining Debt restructuring options
Identify potential debt restructuring ‘solutions’, and;
Analyze the viability of each option and provide recommendations as to the most suitable and feasible option(s) based on management’s vision;
The independent business review and further analysis on the economic environment;
Available funding options and financial resource
Advise on inter-creditor issues
Prepare a high-level (initial) negotiation strategy with financial creditors based on the debt restructuring option recommended;
Phase 3 – Some main jobs of Implementation
Support the company to negotiate with its creditors, including financial and trade creditors, in accordance with the agreed debt restructuring plan and negotiation strategy;
Prepare presentations and correspondence to lenders based on IBR and support the promotion of debt restructuring proposals;
Work with the company’s legal advisors to document and negotiate restructuring (legal agreements) and ancillary documents with creditors;
Advise on mechanisms and alternatives for dealing with any “hold-out” creditors who do not agree to accept the company’s restructuring proposals;
Assist in developing a proper M&A strategy and process; Find potential investors to buy underperforming business segments and assist this process;
Redesign organization and governance structure;
Implement cost-cutting and other turnaround strategies.
Result:
– Reached an agreement with financial creditors based on the agreed debt restructuring plan. They agreed to write off overdue interest and reduce current lending rates by 50% to 75%, which varied according to creditors.
– A collateral-sharing agreement was established to ensure greater fairness among financial creditors.
– Financial creditors agreed to restructure some debts from short-term to medium-term
– Reached an agreement with trade creditors to repay payables in installments
– Dissolved some businesses and successfully sold some underperforming business units
– Implemented turnaround strategies with a lean organizational structure