How can you innovate restructuring deals?

Innovation while structuring any deal would mean ensuring a winning outcome for all the stakeholders. For example deal phasing aligned with strategic milestones, accelerated rewards based on performance, smart deployment of debt instruments could deliver a balanced outcome. Important measure of any innovative structuring is to ensure that all stakeholders experience value addition in their respective context.

For transformation to work, there are key drivers that must be respected: 1. Design slow and act fast 2. Test on a small scale and expand 3. Build a transformation toolbox 4. Know what culture you want to migrate to and make sure you build the tipping point

Working out a company's sustainable debt capacity is a key component of any successful (financial) restructuring. Considerations here are sustainable revenue growth and operating margins, sustainable working capital terms, sufficient allowance for normalized tax payments, a wage structure that supports business stabilization and growth as well as market interest rates. Balancing out opposing interests from lenders/investors and the debtor is essential for a financial restructuring to be successful in the longer-term.

No matter how hard the situation is, there is always a next chance. I have seen this all the time. However, 40% of the good future after restructuring IS anticipation - do not wait until the problem overcomes to you -. We always know, but we resist seeing and accepting. We fear losing control. Then, you still have a chance, but you have lost that many opportunities which restructuring brings to shape a new time. Have the plan ready. You may not use it, but have the plan ready. Thirty percent are strong and down to earth leadership and 30% are communication and teamwork with internals and externals and valuing COMMITMENT and talent among anything else.

1. Root Causes vs. Symptoms: Identifying the root causes is key, as treating symptoms often doesn't resolve the underlying issue. For instance, solving a liquidity issue by taking on more debt could exacerbate a solvency problem in the long run. 2. Qualitative Factors: Beyond the financial metrics, looking at qualitative factors like company culture, market positioning, and customer perception is crucial. 3. Post-Restructuring Strategy: What happens after the deal is just as important. The need for performance metrics and KPIs to measure the success of the restructuring is crucial for long-term success.

I describe the restructuring options available to the company's directors as a buffet. This helps because sometimes there are strong emotions connected with certain words, like Voluntary Administration or Liquidation, when you are speaking with someone about their company. I explain that I'll put lots of dishes on the buffet, to equip them to make the best possible decision in the circumstances for their company. They can then choose which dish, or combination of dishes, look most attractive, and we can then start talking in more detail about how those options may look in their specific situation.

I encourage our newer teammates to problem solve. They lack our institutionalized biases and often suggest unconventional solutions. It challenges the established way of thinking and is how we ensure we continue to innovate and adopt best practices.

I will look at financial restructuring options from an asset-based lender’s perspective. Companies with significant hard asset investments coupled with working capital issues may find it challenging to determine a realistic company valuation after years of accounting depreciation. One way to normalize Tangible Net Worth can be to mandate an appraisal and refinance assets in place. A properly structured asset-based refinancing can provide higher LTV and longer financing term thus providing working capital and debt service relief. The key is to work with a lender that knows the asset base, is willing to understand a turnaround story and can accept commensurate risk.

Offshore Jurisdictions: 1. Leverage Regulatory Adaptability: Court supervised compulsory liquidations offer a level of adaptability to tailor restructuring solutions. 2. Cross-Border Collaboration: Establishing a network of professionals with diverse expertise. Having worked at three of the four big four accounting firms proved invaluable with expanding my network. 3. Hybrid Financing Solutions: Utilize shareholder funding, creditor funding and independent liquidation funding. 4. Tax Efficiency and Incentives: Here in The Bahamas there are sometimes tax incentives e.g. in the past the government waived 50% of the total amount of property taxes in arrears where full payment was made before a certain date.

1. Market Conditions: The state of the market can largely dictate which options are most viable. For instance, debt may be expensive during a market downturn, making equity or hybrid instruments more attractive. 2. Tax Implications: Different restructuring options have different tax consequences. This should be considered when evaluating options, especially when considering cross-border restructuring. 3. Execution Risks: Every option will have its own set of execution risks. Operational restructuring might risk employee morale, while financial restructuring might dilute shareholder value.

A typical mistake turnaround consultants make is to work in a bubble with little or no communication with some of the stakeholders in the restructuring. When I worked in such situations the outcome was generally a major uproar during the presentation of the turnaround plan that benefitted nobody. Rather than trying to surprise the stakeholders with a smart technically suitable solution, a restructuring plan should be developed with the active involvement of all the stakeholders.

A key consideration that is often overlooked in restructuring deals is that the stakeholders involved from the debtor side are often inexperienced in restructurings. External advisors often expect far too much from (a) in-house lawyers, (b) C-suite and executive stakeholders within debtor companies and (c) third party suppliers, customers and other counterparties. external advisors should always keep in mind when engaging such stakeholders that extensive email traffic, requests for information and lengthy calls are required to be taken on top of these stakeholders' standard day job and are usually outside of their areas of expertise, and patience and consideration should be made accordingly.

Open communication with employees is invaluable during the restructuring of a deal. Because, most of the time, employees get irritated when there are changes in the company they are working in. They lose their concentration just because of uncertainty about the company's future even if it's for the sake of all parties. Awareness is crucial because employees deserve an explanation and reassurance that they will not lose their jobs. The valuation of a company is also increased by its approach to the well-being, health, and retirement plans of its employees. A loss in concentration of its employees may cost the company being restructured more than the leverage the company plans to gain as a result of such restructuring.

As stated here, stakeholders are more than just the creditors. If senior-most management and the board have credibility with employees and customers, this is the time to use it. Let the lawyers and the financial advisors deal with lenders and key creditors- they speak their language and free up management time to deal with their highest-value tasks. But spare the BS- straight talk carries the day and employees know the issues and can smell lies a mile away.

In restructuring deals, efficient engagement of all stakeholders is paramount. This diverse group, spanning creditors, shareholders, employees, customers, suppliers, and regulators, demands transparent and clear communication. Establishing trust and rapport is key, laying the foundation for effective negotiations. The goal is consensus, achieved through understanding each party's unique interests and expectations. This proactive approach not only secures support but also minimizes conflicts and potential litigation. Successful stakeholder engagement is not just about approval; it's a strategic move to align interests, enhance credibility, and increase the likelihood of a successful restructuring, navigating potential conflicts early on.

Technology is not just what you can do with computers, but also includes legal technology. For example, should the borrower consider liability management transactions that are custom-tailored to give it more time to turn itself around? If looking for a bankruptcy solution, could a Dutch, French or Singaporean restructuring (or a UK scheme) followed by a Chapter 15 US approval process be part of a more effective solution than Chapter 11 alone?

Investors pay also attention to which tools the company being restructured is using to prevent the leaking of information or the level of measures they take to ensure a "thick" firewall against cyber threats. One can argue that such measurements are getting more vital and constitute even a factor in the company's valuation. Transparency is crucial, however, unattended disclosures of confidential information may cause irreparable harm to third parties or contracting parties of the company. Therefore, exemptions to disclosures of confidential information should be worded carefully and in accordance with laws.

Absolutely spot on! In today's digital age, technology is like the secret sauce in the recipe. ?? Using the right tech tools can make the process smoother and more efficient. Just imagine being able to run simulations to predict outcomes or having real-time data analytics to guide decisions! And with things like blockchain, the integrity of the deal is safeguarded. It's all about staying ahead of the curve. Leveraging technology is like having a superpower; it amplifies the potential of what you can achieve. It's kind of like turning a regular car into a supercharged racing machine! #TechPower #DriveInnovationForward

1. Costs: Implementing advanced technology isn’t free or even cheap. Assessing the cost/benefit ratio is essential, as is considering how the expenditure aligns with the goals and budget of the restructuring deal. 2. Scalability: Technology isn’t just a one-time fix but should be scalable to meet future requirements, especially for firms aiming for growth post-restructuring. 3. Human Element: Integrating technology requires training the human resources who will operate it. Employee buy-in is often underemphasized but crucial. 4. Competitive Intelligence: Technological tools can also provide competitive intelligence, offering insight into market trends and competitor strategies, which can inform the restructuring process.

Can leverage AI to validate and track the accuracy and completeness of data or information of the deal in the due diligence exercise.

Absolutely! Monitoring is like having a GPS for your journey. While you've set a destination with your restructuring, it's super important to keep checking if you're on the right path. Sometimes, there might be roadblocks or better routes available. By keeping a close eye on things with those handy KPIs and milestones, you can ensure you're not only on track but can also make quick detours if needed. And always, always keep the stakeholders in the loop. It's like giving them a passenger seat in your journey, so they know what's happening and where things are headed. Remember, a well-monitored plan is like a well-tended garden - it'll grow and flourish with the right attention! #StayOnTrack #GuidedJourne

1. Pivot or Persevere: Sometimes, despite all the planning and execution, the restructuring might not yield the expected results. Knowing when to pivot (make a fundamental change) or persevere. 2. Periodic Reviews: Setting specific review times can act as ‘reality checks’ to evaluate if the restructuring is moving as planned. 3. Psychological Impact: Employee morale and customer trust can be significant but often under-discussed KPIs. 4. Scalability: As changes are made, and performance is tracked, it's essential to consider how these fit into long-term objectives and whether they're scalable.

This is KEY, as unfortunately from decades of experiences, this is the most underserved necessary requirement for successes. It must be general monitoring on trends, real data, but not from micromanagement perspectives, but in conjunction with experts, and competent analysts & operating personnel. The monitoring must give adequate freedom, but wary of abuses or faulty and unrealistic actions. General communications, of competent monitoring required, but not to overrule experts, but to help lead & guide them, within their roles of expertise.

Define level of publicity vs. Confidentiality of results, especially at the beginning when work is hard and trust not completely attained.

In India, there are several restructurings done by various business house from time to time, to unlock values, grow business with partnership of overseas experienced business . All these are publically available data on stock exchanges websites, that can be used to learn how others have treaded down this path

Some inputs from my experience are 1. Consider Asset Monetization: Consider monetizing non-core assets or intellectual property to generate immediate cash flow or value. Licensing, sale-leaseback arrangements, or joint ventures can be innovative ways to leverage assets. 2. I have seen success with lenders agreeing at some portion of Debt for Equity Swaps: In distressed situations, debt-for-equity swaps can be a creative way to reduce debt burdens. This involves converting debt obligations into ownership stakes in the company. 3. I have seen companies Include contingent value rights (CVRs) in the deal structure which are financial instruments that provide additional compensation to stakeholders if certain milestones are met.

I arrived at the distressed company, tension thick in the air.The CEO grasped at straws,desperately needing a restructuring deal that wouldn't cripple their future.But traditional options felt stale.That's when I, the consultant, stepped in."Let's innovate,"I declared.We explored profit-sharing mechanisms tied to future performance, incentivizing creditors to believe in the company's comeback.We crafted "green bonds," restructuring debt while funding eco-friendly initiatives, appealing to socially conscious investors.It was a gamble, but a calculated one.The deal closed,a first of its kind, and a spark of hope ignited in the CEO's eyes.Innovation,I realized,wasn't just about the numbers,but about breathing new life into a struggling entity

The effectiveness of management's internal and external communication is an important factor driving the outcome of a restructuring. Is the leadership team achieving broad employee buy-in for the restructuring by using it as an opportunity to listen to the "workbench" to drive process and product/service innovation, reduce cost and automate error prone processes? Similarly, how effective is the communication to external stakeholders, such as key suppliers and customers, to minimize uncertainties, achieve their buy-in and minimize holdout risks?

Learn from competitors. Study their failures and success. It is better most of the time to improve and/or add to similar cases rather than reinvent the wheel.

A financial restructuring and the (frequently distressed) circumstances leading up to it can find management under-resourced, both in skill set and body count. An immense quantity of accurate data is needed in real time to inform short term cash-flows as well as strategy and the skills are then required both to interpret that data and present it to other stakeholders. Meantime, someone has to focus on keeping the business running. Where funds allow (and even where they don't, since a lender may well underwrite the expense) the engagement of suitably qualified interim management to support the existing team and provide a first point of contact for external advisers and stakeholders will often enhance the prospects of a successful outcome.

Time is not your friend in any restructuring. Ideally, management identifies the problem(s) early, gets the buy-in from the CEO, Board and equity (if private), and addresses issues properly, with buy-in from parties, etc. But human factors, the company culture or excessive optimism can get in the way, delaying the process and thereby reducing options and impairing implementation of both operational and financial solutions.