restructuring

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:

| Indicator | Green (Stable) | Amber (Stressed) | Red (Distressed) | Score | |---|---|---|---|---| | Cash runway | >6 months | 3-6 months | <3 months | | | Debt maturity | >12 months | 6-12 months | <6 months | | | Covenant compliance | In compliance | Waiver needed this quarter | Already in breach | | | EBITDA trend | Growing | Flat or declining <10% | Declining >10% YoY | | | Customer concentration | Top 5 <30% revenue | Top 5 = 30-50% revenue | Top 5 >50% revenue | | | Supplier risk | All stable | 1-2 at risk | Key supplier threatening COD/termination | | | Management capacity | Strong team | Gaps in key roles | CEO/CFO departure or capability gap | | | Stakeholder alignment | Aligned | Some tension | Active creditor conflict | |

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

| Line Item | Week 1 | Week 2 | Week 3 | ... | Week 13 | Total | |---|---|---|---|---|---|---| | Opening cash balance | | | | | | | | Receipts | | | | | | | | Customer collections | | | | | | | | Other receipts | | | | | | | | Total receipts | | | | | | | | Disbursements | | | | | | | | Payroll and benefits | | | | | | | | Rent and occupancy | | | | | | | | Raw materials / COGS | | | | | | | | Utilities | | | | | | | | Insurance | | | | | | | | Professional fees | | | | | | | | Tax payments | | | | | | | | Interest payments | | | | | | | | Debt amortization | | | | | | | | CapEx (critical only) | | | | | | | | Other disbursements | | | | | | | | Total disbursements | | | | | | | | Net cash flow | | | | | | | | Closing cash balance | | | | | | | | Revolver availability | | | | | | | | Total liquidity | | | | | | | | Minimum cash threshold | | | | | | | | Liquidity surplus / (deficit) | | | | | | |

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:

| Stakeholder | Claim ($M) | Priority | Security | Leverage | Current Posture | Strategy | |---|---|---|---|---|---|---| | Senior secured lender(s) | | 1st priority | [Collateral description] | High (can enforce) | [Supportive/Neutral/Hostile] | [Approach] | | Second lien / mezzanine | | 2nd priority | [Collateral description] | Medium | | | | Unsecured creditors | | General unsecured | None | Low individually; high collectively | | | | Bondholders | | Per indenture | Per indenture | Depends on indenture trustee | | | | Trade creditors (key) | | General unsecured | None | Operational leverage (supply disruption) | | | | Pension fund / employees | | Priority per jurisdiction | Statutory | Regulatory and political | | | | Equity holders | | Residual | None | Low in distress; Board control | | | | Management team | | N/A | N/A | Operational knowledge | | | | Key customers | | N/A | N/A | Revenue concentration | | |

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 | Description | Pros | Cons | Best When | |---|---|---|---|---| | Operational restructuring | Cost reduction, revenue improvement, working capital optimization | Preserves enterprise; no creditor impairment | Slow; may be insufficient if leverage is the problem | Operational underperformance with manageable debt | | Out-of-court financial restructuring | Consensual debt renegotiation (amend & extend, covenant relief, debt-for-equity swap) | Faster; lower cost; less stigma; management retains control | Requires unanimous or supermajority creditor consent; holdout risk | Limited number of creditor groups; alignment achievable | | Pre-packaged bankruptcy | Agreement reached pre-filing; Chapter 11 for confirmation only | Speed of out-of-court + binding on all via court | Filing stigma; customer/supplier disruption risk | Complex capital structure but deal achievable pre-filing | | Chapter 11 / Administration | Court-supervised restructuring with automatic stay | Binds all creditors; DIP financing available; contract rejection | Expensive; slow; management may lose control; value destruction | Hostile creditors; complex multi-party negotiation; need for automatic stay | | 363 Sale | Asset sale under bankruptcy court supervision | Clean break; highest value to secured creditors | Operating business may lose value in process | Liquidating value > going-concern under current ownership | | Liquidation (Chapter 7) | Orderly wind-down and asset disposition | Defined end point | Maximum value destruction; job losses | Going-concern value < liquidation value |

Option Scoring

| Criterion (weight) | Operational Restructuring | Out-of-Court | Pre-Pack | Chapter 11 | 363 Sale | Liquidation | |---|---|---|---|---|---|---| | Value preservation (25%) | | | | | | | | Speed to resolution (20%) | | | | | | | | Stakeholder support (20%) | | | | | | | | Cost of process (15%) | | | | | | | | Business continuity risk (10%) | | | | | | | | Management control (10%) | | | | | | | | Weighted total | | | | | | |

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:

| Viability Test | Assessment | Evidence | |---|---|---| | Core business profitability | Is the core business EBITDA-positive (excluding distress costs)? | Adjusted EBITDA analysis stripping out restructuring charges, non-recurring items | | Market position | Does the company have a defensible market position? | Market share, competitive moats, customer switching costs | | Cash flow generation | Can the business generate positive operating cash flow post-restructuring? | Projected UFCF under restructured cost base | | Capital structure sustainability | Can a restructured balance sheet support the business? | Debt / EBITDA <4x post-restructuring; interest coverage >2x | | Management capability | Is the management team capable of executing the turnaround? | Track record, gaps, need for CRO or interim management | | Stakeholder support | Will key stakeholders (creditors, customers, employees) support the plan? | Creditor discussions, customer retention indicators, employee sentiment |

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

| Asset / Value Component | Going-Concern Value | Orderly Liquidation Value | Forced Liquidation Value | |---|---|---|---| | Enterprise value (DCF or multiple-based) | $___M | N/A | N/A | | Real estate / facilities | [Included in EV] | $___M (appraised) | $___M (distressed sale) | | Equipment and machinery | [Included in EV] | $___M (auction value) | $___M (scrap value) | | Inventory | [Included in EV] | $___M (50-80% of book) | $___M (20-40% of book) | | Accounts receivable | [Included in EV] | $___M (80-90% of book) | $___M (60-75% of book) | | Intellectual property | [Included in EV] | $___M (if separable) | $___M (if any) | | Goodwill / workforce | [Included in EV] | $0 | $0 | | Total value | $___M | $___M | $___M | | Less: Priority claims (admin, DIP, wages) | ($___M) | ($___M) | ($___M) | | Less: Secured claims | ($___M) | ($___M) | ($___M) | | Less: Wind-down costs | N/A | ($___M) | ($___M) | | Available for unsecured creditors | $___M | $___M | $___M | | Unsecured recovery rate | ___% | ___% | ___% |

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

| Negotiation Element | Strategy | Rationale | |---|---|---| | Forbearance agreement | Request [X]-month standstill on enforcement while plan is developed | Buys time; prevents value-destructive acceleration | | DIP / new money | Seek $[X]M DIP facility from [existing lenders / new source] | Fund operations during restructuring; priming lien if in Chapter 11 | | Amend and extend | Extend maturities by [X] years; reduce amortization | Matches debt service to cash flow capacity | | Covenant relief | Waive [specific covenants] for [X] quarters; reset at [new levels] | Avoids technical default while business stabilizes | | Debt-for-equity swap | Convert $[X]M of [tranche] to equity at [X]% ownership | Reduces leverage; aligns creditors with recovery | | Haircut / write-down | Reduce principal by [X]% on [tranche] | Only when liquidation analysis proves impairment | | Interest reduction | Reduce cash interest; PIK toggle for [X] quarters | Preserves cash for operations | | Asset sales | Sell non-core assets to repay $[X]M of secured debt | Reduces debt; demonstrates good faith |

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)

| Action | Expected Cash Impact ($M) | Implementation Effort | Owner | |---|---|---|---| | Freeze all discretionary spending | $___M saved | Low | CFO | | Halt non-critical CapEx | $___M saved | Low | COO | | Accelerate AR collections (call past-dues, offer discounts for early payment) | $___M accelerated | Medium | Treasury | | Extend AP (negotiate 30-day extensions with non-critical suppliers) | $___M deferred | Medium | Procurement | | Reduce inventory (halt new orders, liquidate excess) | $___M freed | Medium | Supply Chain | | Implement weekly cash reporting (13-week model) | Visibility | Low | CFO | | Renegotiate or terminate non-essential contracts | $___M saved | Medium | Legal |

60-Day Quick-Wins (Cost Structure)

| Action | Expected Annual Savings ($M) | Implementation Effort | Owner | |---|---|---|---| | Headcount reduction (eliminate redundant roles, contractors first) | $___M | High | CHRO | | Facility consolidation (close underutilized sites) | $___M | Medium | COO | | Procurement renegotiation (top 10 vendors by spend) | $___M | Medium | Procurement | | Pricing review (eliminate unprofitable products/customers) | $___M (margin improvement) | Medium | Sales/Finance | | SG&A rationalization (travel, marketing, subscriptions) | $___M | Low | All |

90-Day Quick-Wins (Revenue and Margin)

| Action | Expected Revenue/Margin Impact ($M) | Implementation Effort | Owner | |---|---|---|---| | Customer profitability analysis (exit unprofitable accounts) | $___M margin improvement | Medium | Sales/Finance | | Pricing increases on inelastic products/services | $___M revenue uplift | Medium | Sales | | Sales force effectiveness (reallocate to highest-value accounts) | $___M pipeline improvement | Medium | Sales | | Working capital optimization (DSO/DPO/DIO targets) | $___M cash flow improvement | Medium | Treasury | | Supply chain optimization (supplier consolidation, logistics) | $___M cost reduction | High | Supply Chain |

9. Restructuring Plan Summary Framework

The final restructuring plan must address:

| Plan Component | Content | Status | |---|---|---| | Business plan | 3-5 year projections under restructured operations | | | Capital structure | Pro forma balance sheet post-restructuring; target leverage ratios | | | Stakeholder treatment | Recovery waterfall for each creditor class and equity | | | Operational changes | Cost reductions, revenue initiatives, management changes | | | Liquidity | Sources and uses of cash through restructuring; DIP or new money terms | | | Implementation timeline | Key milestones from plan approval through emergence | | | Governance | Board composition, management team, reporting requirements | | | Monitoring | KPIs, covenant package, reporting cadence to creditors | |

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.