Advanced Debt Restructuring

The past few years have seen rising leverage, the evolution of more complex-laminated structures and the erosion of lender protection in loan documentation.

This has created a volatile cocktail which is now being shaken by economic forces in the shape of rising interest rates and higher costs. It is against this background that defaults are expected to revert to normal levels and will presage a wave of restructurings.

Matters have been complicated further by the absence of any direction on how the new market will respond to the new dispensation featuring laminated structures, the transferability of loans and ability to relocate corporate jurisdiction.

This program explores the practical issues, options and tactics which will face parties in leveraged deals as they pick their way through the corporate debris.

The programme will also appeal to those involved in general debt restructurings.

Course Content:

Background - Critical aspects in loan documentation and their impact on restructuring
 Anatomy of a non-leveraged corporate restructuring
 Anatomy of a leveraged restructuring
 Three key documents everyone should read
 Key differences between leveraged & non-leveraged loans
 Issues affecting listed debt securities, notes and bonds
 Identifying the critical aspects in the loan

The Restructuring Process
 Stages in the process
 Steering Committees, selection and other key issues
 Standstill Agreements – Negotiating tactics, content and other key aspects

INSOL principles and the London Approach
 Formal vs Informal Approaches – pros and cons
 Review of 8 INSOL Principles on Restructuring
 The London Approach – rationale
 London Approach – application

Triggers for restructuring
 Typical sectors affected and why
 Main reasons driving restructuring
 Typical early warning signals of distress
 Triggers for non-leveraged corporates (non I-grade)
 Additional triggers for listed companies
 Triggers & issues specific to leveraged deals
 How and why loan documentation affects restructuring

Insolvency – key tests & current issues
 Why, when & how to test insolvency
 Basic approaches in key jurisdictions
 Cash flow test – approach, application & recent trends/cases
 Balance sheet test –approach, application & key issues
 Other typical approaches (statutory requirements)

Directors – critical aspects & how to mitigate them
 Types of Directors (Shadow, NEDs)
 Directors’ roles & duties & relevance (listed & private cos)
 The critical danger issues for directors
 Strategies for mitigating liability for Advisors, Lenders and Shadow Directors

Restructuring route map – for the various players
 Route map for senior secured creditors (primary & secondary)
 Route map for junior secured creditors (primary & secondary)
 Route map for unsecured creditors
 Route map for debtors
 Issues relating to syndicated & bilateral deals
 Issues for advisors
 Issues for transaction services, due diligence

Barriers to restructuring & mitigating factors
 The critical risk areas for directors
 Managing the group’s cash
 Managing the key stakeholders
 Board/management – overcoming denial & the apathy trap
 Transactions vulnerable to attack

Tactics for managing key stakeholders to best effect
 Managing the lead banks/ mla & other lenders
 Issues with junior lenders
 Issues with suppliers, landlords and customers
 Matters affecting management & staff
 Issues affecting corporate lenders
 Additional matters for issues for listed companies
 Matters specific to leveraged transactions

Issues bilateral/club deals
 Structure of lending bank – 3 models
 Impact on restructuring in bilateral deals
 Managing conflicts in club deals

Issues specific to syndicated deals
 Syndicate composition – who is in /out (sub-participations)
 Role of the agent bank & security trustee
 Transfer rights and restrictions
 Waivers & restrictions (majorities & super majorities)
 Events of default & sponsor flexibility
 Standstills & confidentiality

Anatomy of a turnaround
 Where are we starting from – 3 scenarios
 Valuation and the fulcrum capital (where is it and why it matters?)
 Four key ingredients for successful restructuring
• Control
• Funding
• Trust
• Plan
 The right people – what is required (board, CEO and FD)
 The first steps - strategies to stabilize the business
 Holistic approach (operation, process, strategic & financial)

The six key steps in the restructuring process
 What can be done – operational vs financial
 What do we need – how will we fund this?
 What do we do – purchase company or assets?
 When can we do it – pre or post insolvency?
 How can we do it – administration, schemes etc
 Where can we do it – UK, abroad

Operational, process & strategic restructuring
 The full range of options
 Operational restructuring – key aspects to review
 Process improvements – 3 key areas, 3 key dimensions
 Strategic restructuring – why it matters

Financial restructuring options and issues
 Injecting new cash vs reduction of debt
 Reduction of debt - debt-for-equity
 Reduction of debts - debt buybacks
 Form of new & old money – equity, PIK, warrant
Issues for new equity
 Shareholder protection
 Information issues
 Exit issues
 Priority and ranking
 Other matters

Specific issues in debt-for-equity swaps
 Rationale
 Formal requirements
 Valuation of the new equity
 Tax issues generally

Debt repurchase by sponsor
 Issue re the purchaser (sponsor or borrower)
 Effecting the purchase – tenders, Dutch auctions, exchange offers
 Accounting issues
 Tax issues
 Other matters (insider dealing on bond buybacks)

Relevant instruments – key terms, pros and cons & valuation
 PIK & PIYC loans and notes
 Convertible loans
 Preference shares
 Equity
 Warrants

What to buy and when (pros and cons)
 Acquiring the business pre- insolvency
 Acquiring the business post-insolvency
 Pros & cons of buying the company as a going concern
 Pros & cons of buying the assets

Transactions vulnerable to attack
 Transactions at an undervalue
 Transactions defrauding creditors
 (Voidable) preferences
 Issues with floating charges
 Pensions Regulator & moral hazard

Cram-downs – how to achieve them
 Rationale & general principles
 Techniques for cramming down lenders & creditors
 Techniques for cramming down equity providers
 Other issues to consider (exchange offers)

Formal procedures – requirements, pros and cons of each
 CVA
 Schemes of arrangement
 Administration
 Demergers under section 110 Insolvency Act
 Winding up (compulsory or voluntary)
 Administrative receivership

Where to effect the restructuring
 Where to implement the restructuring Jurisdiction & COMI
 Impact of EU Directive & UNCITRAL
 Cases in action

Delivery:	In house
Category:	Debt and Recession