Course dates
Course Overview
A high proportion of financial restructurings are failing in the slowing global economy. While these restructurings were considered to be situations of “amend and extend” the reality is too often that they were “extend and pretend”. An increasing number of borrowers are failing to meet their loan obligations. Banks lending to such troubled borrowers are often faced with a dilemma: enforcing liquidation which can provide certainty of a short term return but which can involve a significant loss of principal, or giving the borrower more time which adds yet more uncertainty to a risky recovery process.
In today’s tough liquidity conditions, credit professionals are required to quickly identify what is causing borrowers problems and provide the most appropriate and cost effective financing solution. Such solutions
can be unique to the sector in which the company operates and specialist knowledge may be required.
Summary of course content
- Address early warning signals and identify the causes of the borrower’s problems
- How integrated strategic and financial restructurings can avoid ‘amend and extend’ becoming ‘extend and pretend’
- Evaluate the various loan workout and restructuring options from simple amend and extends through to debt for asset swaps and debt for equity swaps
- Develop repayment programmes tailored to the borrower’s operating cashflow
- Identify which borrowers can be returned to viability, as opposed to those for whom a quick liquidation is the most realistic course
- Provisioning under IAS/IFRS
- Basel III considerations
- The use of CoCo Bonds in bank restructurings
Methodology
This course takes a practical approach to teaching with the use of:
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Case studies to emphasise the key learning points, including Excel spreadsheets and documentation templates which can be a useful tool in the workplace after the programme
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Practical sessions where you will have the opportunity to apply the skills acquired during the programme and ensure you have a complete understanding of the topics before leaving the course
Who should attend this training course?
- Bankers in loan workout, special situations, watchlist, debt management
- Heads of credit
- Risk managers
- Senior financial analysts
- Senior lending officers and senior relationship managers
- Lawyers
- Private equity managers
- Hedge fund managers
Supporting publication
Day 1
Overview of loan workouts and restructuring
- Lessons from experience
- Introduction to the loan workout process
- Initial analysis: use of liquidation models to assess each stakeholder’s economic interest
Distress at a tier one auto components supplier
- How does a bank’s collateral perform when the borrower is in distress? Special factors related to the car industry
- The London Approach in action
- Nuisance power of bondholders
- Use of debt-equity swaps, warrants, PIK
- Ring-fencing problematic operations
- Jurisdictional changes
- Restructuring term sheets
Case study: Schefenacker is a major manufacturer of mirror systems for the automotive industry. It also has a lighting division. In August 2006 management became concerned about the group’s operational performance. This case study highlights the complexities of negotiating restructurings where there are different classes of creditors.
Restructuring the balance sheet of a highly leveraged company – B2B courier
Case study: Restructure the company’s balance sheet and propose Heads of Terms. The debrief will include restructuring terms sheets, rationale and actual outcome.
Problem Loans and Distressed Debt Multi-creditor workouts
- An overview of The London Approach
- Steering committees
- Debt moratoria
- Review of typical documentation for standstill agreements and co-ordinating committees
A retailer in distress
- What were the early warning signals? How could the lender have acted upon these in the absence of covenant breaches?
- What were the causes of the problem? Are there any creative accounting issues?
- How can the issues be addressed?
- Who has the economic interest?
- Should the lender give time?
- Who are the other key stakeholders and what will be their negotiating position?
- What liabilities crystallise on a gone concern basis?
Case study: Jessops, a photographic retailer with over 300 stores. They encountered trading difficulties in 2006 with a consequently catastrophic loss of stock market value. A major operational restructuring was initiated in 2007 together with a financial restructuring.
- Assessing viability
- How can we structure the pricing (including kickers) to ensure the right return?
- Debrief: current situation; who will buy the debt?
- The negotiating positions of stakeholders
Case study: Jessops – negotiate terms of the financial restructuring.
Day 2
The use of:
- Increased interest rate
- Part cash pay interest / part PIK
- Restructuring fees
- Success fees and how to tie these to the company’s ability to pay
- Warrants
- Convertible term loans
- Debt-equity swaps
- Debt-asset swaps
- Basel II and III considerations
A distressed biodiesel producer: a green facility before its time?
- Identification of causes of financial distress
- How can the causes be addressed?
- What will it take for the facility to become economically viable?
- Who has the economic interest?
- Use of debt-equity swaps
- Nuisance power of shareholders
- How the takeover was structured
Case study: Biofuels Corporation was listed on AIM and was the UK’s largest production facility of its type in Teesside in 2006 with an aim to capitalise on the demand for “green energy”. It encountered severe trading and financial difficulties. Where did it all go wrong?
Major case study
- Conglomerate facing strategic difficulties requires financial restructuring. Delegates work in groups to present their favoured solutions, to include detailed consideration of the firm’s debt capacity.
Day 3
Valuing the distressed company’s assets
- DCF / NPV approaches
- Selecting an appropriate discount rate: calculating WACC; use of Capital Assets Pricing Model
- Terminal values: use of perpetual growth models
- Comparable companies multiples
- Comparable transaction multiples
- Provisioning: IAS 39 and IFRS 9
- The use of CoCos (contingent convertibles) in bank restructurings
Hotel in distress: should we take the bidder’s offer or invest and hold?
- Identification of causes of financial distress
- How can the causes be addressed?
- Using consultants’ reports
- What will it take for the hotel to become economically viable?
- Who has the economic interest?
- Take the offer or fund investment in the hope of realising higher value in future?
- What value can the distressed debt investor achieve?
Final case study: Should the bank accept the offer of a distressed debt investor for its position.
InterContinental Grand Stanford Hotel, Hong Kong, Hong Kong
This programme takes place on a non-residential basis at the InterContinental Grand Stanford Hotel. Non-residential course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.
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Adrian Grant
Adrian has over 20 years' experience in lending to the business sector. Having worked in origination, credit and loan workout roles as a senior manager and consultant, he is uniquely qualified to deliver this programme. Adrian is a consultant and trainer to the banking sector. With range of services including mentoring bankers in their day-to-day work and the provision of research services to support his clients' business expansion plans.
Before becoming a consultant, Adrian was Regional Director, Ireland for National Australia Bank Group's Corporate and Institutional Banking division. In 2001, he started this operation and in five years grew the business to become a recognised force in the Irish market. He was responsible for all aspects of the business, including new business development, credit proposals, workout of difficult credits and growing the team. He built significant client relationships in a wide range of sectors, including Energy and Utilities, Food, Aerospace, Healthcare and Real Estate.
In 1996, Adrian became Senior Adviser and Team Leader at Bank Gospodarki Zywnosciowej SA ("BGZ"), an integrated corporate and financial restructuring project financed by the UK Know-How Fund. Leading a multi-cultural team of banking, systems and loan workout consultants, Adrian spearheaded the return to viability of significant customers of BGZ, leading financial restructurings under the auspices of the specialist legislation (including "compromise agreements" such as the Ugoda Bankowa).
From 1994 to 1995, Adrian was a Senior Manager for Lloyds TSB, responsible for credit sanctioning and resolution of problem loans for fifty branches in central London. In 1989, Adrian was appointed to Lloyds' New York operation, which had encountered severe problems in its leveraged and structured finance book. He was responsible for engineering financial solutions and workouts for a wide range of midmarket customers.
Adrian holds a Masters of Business Administration from Manchester Business School, and the Institute of Financial Services' Financial Studies and Banking Diplomas (both with Distinction).
Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.
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Course dates