Restructuring

Corporate Restructuring & Turnaround

Required Inputs

• Company Overview: Name, industry, revenue, headcount, and corporate structure.
• Nature of Distress: Liquidity crisis, overleveraged balance sheet, operational underperformance, or combination.
• Urgency Level: Weeks of cash remaining (critical if <8 weeks); upcoming debt maturities or covenant test dates.
• Capital Structure: All debt tranches (senior secured, unsecured, mezzanine, convertibles), equity, and intercompany obligations.
• Key Stakeholders: Identity of major creditors, equity holders, management team, key customers, and key suppliers.

Execution Steps

1. Triage Assessment

Before anything else, determine the severity and time horizon:

Scoring: Green=1, Amber=2, Red=3. Total score 8-12 = Stressed (proactive restructuring). 13-18 = Distressed (urgent restructuring). 19-24 = Critical (immediate intervention, formal proceedings likely).

2. 13-Week Cash Flow Model

The 13-week cash flow (TWCF) is the foundational tool for any restructuring. It tracks weekly liquidity on a receipts-and-disbursements basis.

Model Structure

Critical rules for the 13-week model:

• Cash basis only (when cash moves, not when revenue is recognized).
• Weekly granularity (not monthly; weekly matters in distress).
• Bottom-up build from AP aging, AR aging, payroll register, and committed payments.
• Identify the liquidity trough (lowest point) and the week it occurs.
• Model a stress case (10-20% haircut on collections, acceleration of payables).

Use the financial-modeling skill for detailed projection model construction when extending beyond 13 weeks.

3. Stakeholder Mapping

Map every stakeholder by their economic interest and leverage:

Fulcrum Security Analysis

Identify the fulcrum security (the most senior class of capital that is impaired):

Enterprise Value (going concern)   = $[X]M
Less: Senior secured debt          = ($[A]M)  --> Fully covered? [Y/N]
Remaining value for junior claims  = $[B]M
Less: Second lien / mezzanine      = ($[C]M)  --> Fully covered? [Y/N]
Remaining value for unsecured      = $[D]M
Less: Unsecured claims             = ($[E]M)  --> Recovery = [D/E x 100]%
Equity value                       = $[F]M    --> (often $0 in distress)

The fulcrum security holder has the most influence in restructuring negotiations.

4. Restructuring Options Analysis

Evaluate each option systematically:

Option Scoring

Score each 1-5. Recommend the highest-scoring option with contingency plans.

5. Viability Assessment Framework

Determine if the business is viable as a going concern:

Conclusion: Viable / Conditionally viable (with specific changes) / Not viable as going concern.

If not viable as a going concern, proceed directly to liquidation analysis.

6. Going-Concern vs. Liquidation Analysis

Decision rule: If going-concern value > orderly liquidation value, restructuring is justified. Present this analysis to creditors to build support for the restructuring plan.

7. Creditor Negotiation Strategy

Key principle: The restructuring plan must leave every creditor class at least as well off as in liquidation (the "best interests" test in Chapter 11).

8. Operational Improvement Quick-Wins

Immediate actions to stabilize and improve cash flow:

30-Day Quick-Wins (Emergency Cash Preservation)

60-Day Quick-Wins (Cost Structure)

90-Day Quick-Wins (Revenue and Margin)

9. Restructuring Plan Summary Framework

The final restructuring plan must address:

Output Template

## Restructuring Assessment: [Company Name]

**Date**: [Date] | **Urgency**: [Green/Amber/Red] | **Cash Runway**: [X] weeks

### Situation Overview
[Nature of distress, key triggers, immediate risks]

### Triage Assessment
| Indicator | Status | Score |
|---|---|---|
| Cash runway | [Status] | [1/2/3] |
| Debt maturity | [Status] | [1/2/3] |
| ... | | |
| **Total** | | **[X]/24** |

### 13-Week Cash Flow Summary
| Metric | Value |
|---|---|
| Opening cash | $[X]M |
| Total 13-week receipts | $[X]M |
| Total 13-week disbursements | ($[X]M) |
| Liquidity trough (week [X]) | $[X]M |
| Closing cash (week 13) | $[X]M |
| Stress case trough | $[X]M |

### Capital Structure and Stakeholder Map
| Stakeholder | Claim ($M) | Priority | Posture | Strategy |
|---|---|---|---|---|
| ... | | | | |

### Fulcrum Security
[Waterfall analysis identifying the fulcrum security]

### Viability Assessment
[Assessment of each viability criterion with conclusion]

### Going-Concern vs. Liquidation
| Scenario | Total Value ($M) | Unsecured Recovery |
|---|---|---|
| Going concern | $[X]M | [X]% |
| Orderly liquidation | $[X]M | [X]% |
| Forced liquidation | $[X]M | [X]% |

### Recommended Restructuring Path
[Selected option with rationale and scoring]

### Creditor Strategy
[Negotiation approach for each creditor class]

### Operational Quick-Wins
#### 30-Day (Cash Preservation)
[Actions with expected cash impact]

#### 60-Day (Cost Structure)
[Actions with expected savings]

#### 90-Day (Revenue and Margin)
[Actions with expected impact]

### Restructuring Plan Outline
[High-level plan components with timeline]

### Key Risks
| Risk | Impact | Mitigation |
|---|---|---|
| ... | | |

Quality Checks

• Triage assessment completed with scoring across all 8 indicators to classify severity (Stressed / Distressed / Critical).
• 13-week cash flow model built on a receipts-and-disbursements basis with weekly granularity (not monthly).
• Liquidity trough identified (the worst week) along with a stress case scenario.
• Stakeholder map covers all creditor classes, equity, management, key customers, and key suppliers with claim amounts and priority.
• Fulcrum security identified through a waterfall analysis of going-concern value vs. claims.
• All restructuring options evaluated (operational, out-of-court, pre-pack, Chapter 11, 363 sale, liquidation) with scoring.
• Viability assessment explicitly concludes whether the business is viable as a going concern.
• Going-concern value compared to both orderly and forced liquidation values with recovery rates for unsecured creditors.
• Creditor negotiation strategy tailored to each creditor class with specific asks (forbearance, amend/extend, haircut, etc.).
• Operational quick-wins organized into 30/60/90-day categories with dollar-value estimates and named owners.
• Restructuring plan addresses all 8 required components (business plan, capital structure, stakeholder treatment, operational changes, liquidity, timeline, governance, monitoring).
• Cross-reference: financial-modeling skill used or referenced for the 13-week cash flow model and business plan projections.