This course can also be presented face to face in-house or via live in-house webinar.
Debt Restructuring Course Objectives
- Understand fundamental concepts in early problem loan workout from major case studies including the recent collapse of Carillion in the UK.
- Identify Early Warning Signals in spotting potential problem loans
- Review the principal international classifications of problem loans
- Apply methods to successfully restructuring and rescheduling problem loans in different international jursidictions including the EU and US.
- Assess the key methods that can be applied to successfully restructuring debt facilities
- Apply the IFC framework to the management of the restructuring process
- Indentify triggers in deciding whether to work out or to foreclose on the problem client
- Assess the restructuring strategy and application of the independent business review
- Apply the ‘Standstill’ process in controlling the credit recovery process
- Apply the Standstill Agreement and the cooperation of the other creditors
- Reviewing case studies including Ineos & House of Fraser in applying work-out methods including rescheduling, restructuring, CVAs, Pre packs, ‘hair cuts’, debt to equity swaps etc
Debt Restructuring Course Content
Introduction to Debt Restructuring – Key drivers
- Non-performing loans and the challenges faced by bankers
- When to recognise the non-performing loan
- How to deal with problem clients that have not defaulted
- Introduction to a framework to deal with covenant breaches
- Review of common reasons for company default and the creation of non-performing loans
- Understanding the attitude of problem clients and the difference between ability to pay and willingness to pay
- Identify the triggers in deciding when to restructure / reschedule and when to accelerate.
Workshop – Advanced discussion of different alternative scenarios in dealing with loans in default and covenant breaches from case study examples. Using the case study of the collapse of Carillion to learn how things can go wrong.
Early Warning Signals of potential distress
- Review of key financial EWS
- Danger levels of different financial covenants in different industries
- EWS derived from the financial statements
- Identification of the manipulation of the financial statements
- Using univariate and multivariate frameworks to identify financial distress
- Application of the Z Score to distressed scenarios to identify potential failure
- Review of the IFC’s classification and check list of Early Warning Signals
- The importance of identifying key external factors affecting corporates
- The application of GNPESTEL model to external risk analysis in the context of the global economy in 2018
- Identifying defects and mistakes committed by the company ahead of time
- Management risk and its impact on corporate recovery
- Interrogating problem management and understanding gaps and areas for improvement
- The role, power and limitations of the lender in restoring management effectiveness
- Strategic risk and its impact on the problem client
Workshop – Delegates in their project teams will analysis the EWS and external and qualitative risks facing a case study problem loan, providing recommendations for how a lender could seek to improve those risks and protect itself from potential risk crystallisation. We will compare this to the lessons learned from the case of Carillion.
Identifying work out solutions versus insolvency solutions
- The importance of understanding whether the problem loan can be ‘worked out’ as a going concern
- The importance of and belief in the recovery strategy
- Using cash flow forecasts to believer the business plan and recovery strategy
- Expectations of financial performance and financial covenants under the recovery strategy
- Deciding whether to leave the borrower in collateral possession or not
- Application of the Butler Matrix in deciding how to treat the existing management
- Review and application of the IFC framework for problem loan resolution
- The use and application of sensitivity analysis in understanding the strength of the company’s recovery plan.
Case Study Workshop – During this session, the delegates will be given a private sector case study in the US hotel sector and will apply the Butler and IFC frameworks to the case study. The aim will be for the attendees to assess whether they believe the company’s recovery strategy and its ability to honour the restructured loan’s debt service going forward.
Different restructuring and recovery methodology
- The concept of automatic stay and protection of the going concern from other creditors
- Administration, Receivership and Liquidation
- Automatic stay in administration
- Different rescue procedures
- Cram down of creditors
- Position and rights of management
- Personal liability of directors
- Ranking and claims of creditors
- Time limits of filing claims
- Introduction to Standstill Agreements and controlling the banking syndicate
Case Study Workshop – During this session the attendees will review a range of case study scenarios including the CVAs of Ineos and House of Fraser in the UK and review the potential application of the different recovery methodology discussed during the session. The delegates in their project groups will also assess how they need to engage with other creditors and assess the drafting of a standstill agreement for the problem loan restructuring.
Implementing the Restructuring process
- Understanding different stakeholder interests and how to manage them as part of the process
- Using a 10 point plan for effective restructuring
- The case for and against a moratorium
- Workout arrangements and responsibilities within the lending institution
- Protecting security throughout the workout
- Financial projections and sustainable cash flow and debt
- The importance of the Independent Business Review
- Negotiations and pricing the workout
Workshop – Having reviewed the implementation process and the various worked examples developed during the session, in their project teams the attendees will review a new major new case study problem loan in the UK retail sector, complete with financial forecasts in an excel financial model. In order to assess whether they would proceed with the restructuring, the attendees will draft the Scope of Works for an Independent Business Review as part of their initial analysis
Sessions 3 & 4
Final Case study – Implementing the restructuring process in practice.
Final Case Study Workshop – Using the case study, the attendees working in their project teams, will provide a complete restructuring / workout solution to the problem loan on the basis of the information covered during the course. They will required to identify the key EWS inherent in the problem loan, review the sensitivity of the forecast financial projections in the excel model and propose a schedule of the restructured loan. The team will also include terms of a Standstill Agreement, if required and will present their restructuring solutions.
Background of the Trainer
For the past 15 years the trainer has provided training programmes to some of the world’s largest financial institutions including HSBC, EBRD and the EIB. Cooperating with a number of leading training companies, he has trained delegates from some of the largest industrial and financial institutions across the Middle East, Far East, Europe and Southern and Eastern Africa. He also lectures in a number of professional papers for the ACCA and CIMA examination boards at the Tianjin University of Finance and Economics, the leading Business School in China.
In parallel to his training, the trainer also has a 25-year career in Banking and Finance that originated in the City of London and has specialised in credit risk analysis, debt structuring and problem loan workout and debt restructuring for international corporate clients. He has worked with a number of the world’s leading financial institutions providing lending facilities or private placements worth over US$ 5 billion to the corporate sector. It is this practical, hands on experience of credit risk analysis and balance sheet restructuring that he brings to his professional finance workshops.
Before embarking on his career in banking he acted as an Economic and Political Adviser to the Prime Minister of the Slovak Republic.
Debt Restructuring Course Summary
In a low interest rate environment, bankers and financiers are under increased pressure to undertake more corporate business at higher returns, but at the same time ensuring a low risk weighting. Given that the business climate remains uncertain and volatile, the risk for bankers of developing problem loans through their lending activities, is therefore increasing.
This course has been designed for bankers and financiers to develop a holistic, applied approach to early problem loan workout through a range of different techniques currently applied in UK and international finance. It aims to provide the attendee with a comprehensive overview of the challenges of problem loan workout and with an insight into some of the key methods than can be implemented to assist in the recovery of their financial exposure.
By offering a range of different case studies, financing scenarios and potential solutions to workshop case studies, the attendees will be able to develop a broad applied overview of debt restructuring techniques. This is particularly important in an area of finance where ‘one size fits all’ solutions are not possible and where the financier needs to be open minded, flexible and quick to react to changing circumstances.
The programme draws from the experience of a range of different high profile debt restructuring case studies and failures, including the recent collapse of Carillion in the UK and the failed CVA of House of Fraser in the UK retail industry. A number of the case studies used during the course are those that have been undertaken directly by the trainer.
The course is highly interactive, with the course attendees working in project teams. They will be required to work in their project teams in devising solutions and providing recommendations to the rest of the delegates who will cross examine their proposals in a credit committee environment.
During the second day of the programme, the attendees will use forecast cash flow analysis as part of the strategic business review for the restructuring candidate. A knowledge of the working of Microsoft excel with therefore be an advantage for the attendees.