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Stages during Commercial Debt Restructuring - Restructuring Advisory Group

A debt restructuring generally comes about after a company has thoroughly examined and analysed its debt portfolio, something that involves important decisions regarding taxes, legalities, accounting and economics. As such, it is important that the debt restructuring be conducted in a way that the financial future of the company does not suffer.
Therefore, the different stages of a debt restructuring become very important. Here’s a look at the two stages that are involved in a debt restructuring – planning and implementation.


Once the company advisors have been selected, the process of restructuring the debt can begin.
The first part is known as stabilization. During this stage, it is very important to identify what the key pressure points in a company are and fix them. This is also the stage when the current debt agreements and other vital contracts with creditors need to be reviewed. This paves the way for the preparation stage.
The second part is the preparation stage. Assessments of the business are carried out and if necessary, operational and strategic changes are made to it. These changes are usually implemented by industry experts and consultancy firms. The company advisers are responsible for recognizing the motivations of the security holders. The results of the assessments determine the restructuring plans that the company advisers will formulate. The advisers then present their proposals which are subject to the approval of the company. This brings us to the implementation stage of debt restructuring.


The first stage of implementation is known as pre-offering. The transaction document is created before the restructuring becomes news. The document is supposed to comply with all the market restrictions and procedures while stating what the company is offering to the market. Agreement upon this document brings us to the next stage.
The second stage is called commencement of the offer. The distribution of the offer document to the various security holders is coordinated at this point.
The third stage is the offer period. The agent becomes the single information source with regards to participation and entitlement procedures for the security holders. Instructions and documents from the security holders are examined and checked for correctness and validity. The ‘participating holders’ list is also compiled and reports are sent regularly to the company and its advisers.
The fourth stage is the settlement/expiration of the order. At this stage, the final reconciliation of the debt is performed by the agent. Confirmation is given that bonds that were physically delivered have been processed and all bonds are blocked. After the checks are done, the company’s advisers are told what the final position is. Once the restructuring amount has been agreed upon, the pricing information is looked at. Each security holder’s individual consideration is determined and the clearing systems are pre-advised of the pertinent cash positions.

Article Published by : Restructuring Advisory Group
C.H. Brown is the Founder of Restructuring Advisory Group and is an expert in all facets of chapter 11 reorganizations and the restructuring of real estate debt. Mr. Brown first began consulting to chapter 11 clients in 1990. He has written over 300 bankruptcy reorganization plans that provided both debt and equity financing for the real estate projects. In addition to consulting to property owners in chapter 11, Mr. Brown has, as a principal, restructured the debt on 2 of his own projects through chapter 11 and understands the process from the property owners’ perspective.