Turnaround & Restructuring
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Are you managing distress or vice-versa?
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‘The powers that modern lenders wield rival in importance the hostile takeover in disciplining poor or under performing managers… When a business enters financial distress, the major decisions—whether the CEO should go, whether the business should search for a suitor, whether the corporation should file for Chapter 11—require the blessing of the banks' (Baird and Rasmussen, "Private Debt and the Missing Lever of Corporate Finance")
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Activities |
Description |
| Business Plan: Review of management’s forecasts and valuation |
Bottom up financial forecast and feasibility of growth and market projections, add-backs, capital expenditures
Reasonableness of sources and uses of cash
Valuation to support loan covenant implementation and other negotiations |
| Loan-covenant metrics |
Design and evaluation of impacts of metrics and coverage ratios
Recommendations for actions in case of violations |
| Short-term cash projections |
Review short-term liquidity needs, develop operations-based rolling cash forecast ("13-week cash flow")
Overview cash management system and process (deposits, investment, disbursement)
Analyze receivables and the efficiency of the collections process |
| Long-term liquidity |
Review capital expenditure and divestiture/acquisition plans
Review management’s valuations in light of the stated strategy
Evaluate alternative sources of liquidity (divestitures, asset sales, equity placements) |
| Identification of collateral options |
Identify valuable assets, sources of cash
Determine feasibility and/or structure of collateralizing assets |
Decision and negotiation support |
Framing decisions in light of developments along the way to maximize outcome
Determining negotiable items and framing discussions with suitors, management |
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