What is Corporate Financial Restructurng?
Corporate
financial restructuring involves any substantial change in a company’s
financial structure, or ownership or control, or business portfolio,
designed to increase the value of the firm. In today's market, proper
restructuring of stressed assets and liabilities may allow good
companies to survive.
About
the Course
This 2-day
intensive course will be taught around several
major topics employing in-depth group work on restructuring case studies and deal
documentation. The focus will be on identifying situations that call
for nonstandard corporate finance solutions, and the design and pricing
of the situation-specific refinancing solutions. Examples of such
situations include stress-induced financial restructuring,
recapitalizations, debt-equity swaps, divestitures, and post-bankruptcy reorganizations. In many cases
resolving these issues will require exchange offers and the
design of debt, equity and mezzanine financing techniques in order to
resolve particular issuer or investor problems that cannot be solved by
conventional methods.
Materials
Participants
will be provided with a package of materials useful to the analysis and
design of corporate financial restructuring techniques. These include including
handouts, case studies, pertinent articles, spreadsheets and sample documentation from
actual restructuring situations.
Course Outline
Topics
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Resources
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Day
1
Tough Times and The Disciplines of Finance
- The Restructuring
Framework
- Proactive
- Defensive
- Distress
- Match
the Solution to the Problem
- The
financing is bad: recapitalize equity, debt-equity swap, sell assets,
restructure debt
- The
business mix is bad: sell businesses
- The
company is badly managed: change of control and/or ownership
- Case study: Goldfield Corporation. What problem? What solution?
- Restructuring Debt
and Equity to Create Corporate Value
- Look at
the fundamental characteristics of the business before looking at
the finance
- What are the strong and weak points of the company?
- The
five principles of corporate financial restructuring: investments, acquisitions,
financing,
payback and risk management
- Managers’
vs shareholders’ vs lenders' interests: the agency problem
- Case study: Tradeshow Planning (Turkey): a company in distress. What is the business, and what is the source of the problems?
- A
Roadmap for Restructuring Choices
- The leverage flowchart
- Choices for restructuring assets
- Choices for restructuring liabilities
- Choices for restructuring control
- Case study:
Tradeshow Planning (Turkey): finding a solution.
Asset or liability restructuring? Is management the problem?
cquisitions or asset sales? Lease finance, corporate debt or deleverage?
- Finding a Solution
- Interactive: What is the company doing right? What should we do differently?
- Matching refunding
choices to corporate finance principles
- Restructuring incentives: making management
equity sweat – and making restructuring worthwhile
- Post-restructuring exit planning
Managing Financial Risk
- Can the company’s CFO predict currencies,
rates or commodity prices?
- Is the company a business – or a bet?
- Dealing with commodity price risk: Susan Oil & Gas (Belize)
- Dealing with currency risk: Oligarch Supermarkets (Russia)
- Conclusion: returning to the fundamental principles of hedging and risk management
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Presentations
TBA
Case studies
TBA
Articles
TBA
Spreadsheets
TBA
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Day
2
Restructuring the Business
- Acquisitions: did they create corporate value -- or
destroy it?
- M&A synergies: revenues, costs or
control? (A flowchart)
- How a well-run company evaluates
acquisitions
- Examples: ISS
and Berkshire
- "Love the cash flow, not the business!"
- Asset sales and corporate divestitures: when
and why?
- Case study: The
New York Times.
Using sale-leaseback to sell your headquarters building
- Selling a business division: opportunities, methods
and valuation
- Before-and-after divestiture analysis
Restructuring the Finance- Financial
Distress and Restructuring
- Valuation of a company in distress: before-and-after analysis
- Loans and Equity Investments Gone Wrong
- Debt buybacks
- Stressed restructurings
- Workouts: restructuring the pricing and terms
- Using the Techniques of Mezzanine Finance for Financial Restructuring
- Explanation
of mezzanine and equity-linked financing instruments
- Subordinated
debt, convertibles and warrants
- Case study: deCode Genetics.
A life sciences company faces a refinancing crisis
- Performance-linked participation debt: an
alternative form of mezzanine
- The
Mezzanine Matrix (the when and why of subordinated and equity-linked
finance)
- Setting targets and linking payout to
performance
- Discussion of appropriate linkage: turnover,
cash flow or profit?
- Building
Materials case study. Recession-related mezzanine management:
- Facing Bankrutpcy and Reorganization
- Liquidation, sale, or debt restructuring?
- Negotiated settlement vs merger vs legal reorganization
- Role of vulture investors
- Debtor-in-possession financing
- Post-bankruptcy reorganization
- If all fails: allocation of liquidation proceeds
- Conflicting Interests and Views
- Shareholders versus lenders
- Lenders versus lenders
- Case study: Watamess Telecom (Algeria). Group
work on problem identification, valuation and restructuring the company's financing and control
Restructuring the Control
- Ownership dispute, transition and exit: financial
choices
- The option of equity recapitalization
- Case study: Sanjay Cement (India). How do we fix the control and regain value?
- Giving up control: at what price? What is
the company worth?
- Case study:
Restructuring Ownership of Simmons
- Conclusion: when to buy; when to
restructure; and when it’s time to sell
Review of the
Restructuring Roadmap
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Presentations
TBA
Case studies
TBA
Articles
TBA
Spreadsheets
TBA
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Additional Resources
Articles
and
Books
TBA
Useful Links
fitchratings.com (bond
ratings)
bondsonline.com (corporate bond
spreads)
damodaran.com
(industry ratios)
advfn.com (corporate financial ratios)
Corporate
Finance and Debt
Capacity Tables
About the Instructor
Dr. Ian
Giddy,
born in South Africa, has taught finance at NYU, Columbia, Wharton,
Chicago and
in over 45 countries worldwide for the past three decades. He was
Director
of
International
Fixed Income Research at Drexel Burnham Lambert from 1986 to 1989. The
author of more than fifty articles on international finance, he has
served
at the International Monetary Fund and the U.S. Treasury and has been a
consultant with numerous corporations and financial institutions in
North and South America, Europe, Asia, the Middle East and Africa. As a
banker and consultant he has been involved in the
growth of the structured finance market in the USA, Europe and Asia. He
is the author
or co-author of The International Money Market, The Handbook
of International Finance, Cases in International Finance,
Global Financial Markets, Asset Securitization in Asia and The
Hudson
River Watertrail Guide. He and his wife are
the founders of Cloudbridge, a nature reserve in Costa Rica.
About FMO
The Netherlands Development
Finance Company (Financierings-Maatschappij voor Ontwikkelingslanden, or FMO for
short) supports the private sector in developing countries and emerging markets
in Asia, Africa, Latin America and Central and Eastern Europe. FMO does this
with loans, participations, guarantees and other investment promotion
activities. The organization's goal is to contribute to the structural and
sustainable economic growth in these countries and, together with the private
sector, obtain healthy returns. FMO is a joint venture of the Dutch State, the
large Dutch banks and the Dutch business community. For further details, see
fmo.nl.
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