On completion of this innovative 3-day course, you will be able to:
- Address early warning signals and identify the causes of the borrower’s problems.
- Identify which borrowers can be returned to viability, as opposed to those for whom a quick liquidation is the most realistic course.
- Evaluate the various loan workout and restructuring options.
- Develop repayment programmes tailored to the borrower’s operating cashflow.
- Identify situations where debt for equity swaps are valid tools, and evaluate potential structures of reward devices such as warrants.
- Understand the complexities of restructurings where debt has been parcelled up and traded among specialised investors.
Course Overview:
With tough liquidity conditions finance professional are required to quickly identify what is causing borrowers problems and provide the most appropriate and cost effective finance solution. As companies are increasingly find it difficult to access cash in the short-term or access capital for investment and growth, today's credit and restructuring specialists are required to have the skills to evaluate the various loan workout and restructuring options available. They also need to determine what the cashflow implications will be, particularly if sourcing alternative credit is expensive, risky and time consuming. And with strict global regulations imminent that will determine how debt is to be structured, parcelled up and traded, credit and restructuring specialists require up-to-date information and refreshed skills in order to efficiently and effectively manage corporate loan workouts and financial restructuring to minimise market risk and secure strong returns.
Methodology:
This course takes a practical approach to teaching by using case studies to emphasise the key learning points. You will have the opportunity to apply the skills acquired during the programme in practical sessions which will ensure you have a complete understanding of the topics before leaving the course.
Day 1
Registration commences at 8:30
Programme runs from 9:00 - 5:00 daily
Introductions
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.
- Restructuring the balance sheet of a highly leveraged company – B2B courier.
Case study: restructure the company’s balance sheet and propose Heads of Terms. Debrief will include restructuring terms sheets, rationale and actual outcome.
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 there negotiating position?
- What liabilities crystallise on a gone concern basis?
- 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.
Day 2
Ensuring the appropriate risk-reward
- Including the use of: – Increased interest rate.
- Part cash pay interest/part PIK.
- Restructuring fees.
- Success fees and how to tie these to company’s ability to pay.
- Warrants.
- Convertible term loans.
- Debt-equity swaps.
- Basel II 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.
- What should Barclays do now.
Multi-creditor workouts
- An overview of The London Approach.
- Steering committees.
- Debt moratoria.
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 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.
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.
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 in the distressed retailer?
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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).
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