GETTING THE RESTRUCTURE RIGHT
Restructuring is the corporate management term for the act of reorganising the legal, ownership, operational, or other structures of a company to make it more profitable or better organised for its present needs. Other reasons for restructuring include a change of ownership or ownership structure, demerger, or a response to a crisis or significant change in the business such as bankruptcy, repositioning, or buyout. Restructuring may also be described as corporate restructuring, debt restructuring, and financial restructuring.
Businesses involved in restructuring often hire consultants both in financial and operational roles, to assist in the transitional phase. Business Solve specifically has access to resources for helping in this. We have the experience to aid in decisions required to save or reposition the company. It enerally involves financing debt, selling portions of the company to investors, and reorganising or reducing operations. Moreover, if necessary assist in reviewing options such as Voluntary Administration and DOCA’s.
The essential nature of restructuring is a zero-sum game. Strategic restructuring reduces financial losses, simultaneously reducing tensions between debt and equity holders to facilitate a prompt resolution of a distressed situation.
Corporate debt restructuring is the reorganisation of companies’ outstanding liabilities. It is generally a mechanism used by companies which are facing difficulties in repaying their debts. In the process of restructuring, the credit obligations are spread out over the longer duration with smaller payments. Thus allowing a company the ability to meet it’s debt obligations. Also, as part of the process, some creditors may agree to exchange debt for some portion of equity. It is based on the principle that restructuring facilities available to companies in a timely and transparent matter go a long way in ensuring their viability which is sometimes threatened by internal and external factors. This process tries to resolve the difficulties faced by the corporate sector and enables them to become viable again. The complexies and scale of work undertaken are all governed by the size and nature of the entities involved. Below gives an idea of some points for consideration before commencing any restructure;
Ensure the company has enough liquidity to operate during the implementation of a complete restructuring.
Produce accurate working capital forecasts.
Provide open lines of communication with creditors who mostly control the company’s ability to raise financing.
Cash management and cash generation during any crisis
Impaired Loan Advisory Services (ILAS)
Retention of corporate management in the form of “stay bonus” payments or equity grants
Sale of underutilised assets, such as patents or brands
Outsourcing of operations such as payroll and technical support to a more efficient third party
Moving of processes such as manufacturing to lower-cost locations
The reorganisation of functions such as sales, marketing, and distribution
Renegotiation of labour contracts to reduce overhead
Refinancing of corporate debt to reduce interest payments
A major public relations campaign to reposition the company with consumers
Forfeiture of all or part of the ownership share by pre-restructuring stockholders
Improving efficiency and productivity through new investments, R&D and business engineering.
Business Solve has both internal and external resources to assist in all types of restructuring projects.