Restructuring

How the money is made

• 1The problem is acknowledged: maturities, broken covenants or sustained losses.
• 2A plan is negotiated with creditors.
• 3The plan is approved and, depending on the case, sanctioned by a court.
• 4That approval is the catalyst: until then the price is trading uncertainty.

What to watch

• Where value breaks: how far down the debt stack the money reaches.
• Whether the plan involves a capital raise, and at what dilution.
• Maturity calendar and the liquidity available to reach it.
• Who controls the negotiation: banks, bondholders or distressed funds.
• Whether there is a court process, and in which jurisdiction.

Typical risks

• Massive dilution of existing shareholders.
• Equity can be wiped out entirely if value does not reach it.
• Timelines stretch and the outcome changes along the way.