Every once in a while it is important to review the debt platform of the business and its group structure. To analyse the group structure in relation to debt security and cross-company guarantees to economise and minimise waste. It may be the case that assets are still bound by the bank or other lenders for unused overdrafts or assets have risen in value since the last valuation and high value assets may be securing small debts at high rates. Alternatively, assets may have been devalued by your Lenders and interest rate increases may have been applied.
There are many objectives for a company to restructure its debt;
- Lower Debt Repayments
- Lower Interest Rate Charges
- Free-up Assets
- Renegotiate terms
- Increase Borrowings
- Preparing the Company for Sale or IPO
Debt restructure can take many forms. It may involve the creation of special purpose vehicles and securitisation techniques, converting current debt into non-recourse loans, off-balance sheet. It may mean the renegotiation with existing lenders and the partitioning of encumbered assets.
With the objectives of the restructure firmly in mind, ICS can create complex financial structures that minimise the impact of debt repayments, isolate potential bad debt and protect the company’s main assets from any form of claim or repossession. This type of debt restructure may be crucial for companies facing hard financial crisis.
Debt Restructure is not only for troubled or stressed companies. Debt restructure promotes financial health and assures financial efficiency.
When selling companies or parts of a company group, debt restructure may be crucial to aid the sale. To remove liens and charges over assets being used for cross-company guarantees and to isolate debt in a given subsidiary or separate corporate vehicle.
It is also important to track the best rates for borrowings and to ensure that corporate loans are properly match-funded; short-term assets are matched with short-term borrowings and long-term assets are matched with long-term borrowings. To be ‘rate efficient’ can assist in the company’s cash-flow.
Whatever the objective, ICS can offer concrete advice and create the necessary structures needed for efficient and sustainable debt restructure.
To speak with one our partners about how we can help you restructure your debt, lower debt commitments or isolate troubled subsidiaries, please contact us in the strictest confidence.