Debt Restructuring Plans

It’s all about Capital Solutions: Many private credit managers manage an “Opportunistic Credit” investment program. Traditionally, these opportunistic credit investors known as ‘distressed’ investors targeted the fulcrum security within the capital structure of a highly leveraged/distressed company, whereby the holders of this debt class took control of the equity once the company exited Chapter 11. Today, most Opportunistic Credit investors have updated their playbook to avoid distressed companies that must go through Chapter 11. BK is expensive, costing ~10% of the total enterprise value of a company, which wipes out the pre-petition equity and eats into the recovery value of creditors. In BK, lawyers and bankers win, but the fees they earn comes directly out of recovery for the debt. Investment Managers recognize that companies typically benefit if they can continue to operate outside of Chapter 11. So, today it’s all about Capital Solutions. ‘Higher for Longer’ has proved punishing for many over-levered companies as interest expense eats up available cash flow, leaving little/no distribution for shareholders. Liability management exercises such as debt refinancing, discounted debt buybacks, and tender offers, help a company improve its debt profile without the need to convert debt into equity or fundamentally change the company's ownership structure. Private Equity sponsors have been quick to adopt to this market practice and prefer a pro-active engagement with creditors to strengthen the capital structure and cash flow of a company thru capital solutions. This allows the PE sponsor to retain their full equity position rather than being wiped out or diluted, which occurs in traditional restructurings where new equity is issued to creditors. Capital Solutions are always a negotiation, and often the PE sponsor is willing to invest additional equity to support the company since it is only fair that both the equity sponsor and creditors do their part to strengthen the capital structure, to enable the company to thrive. Transactional volume from BK to Capital Solutions shown below in this chart highlights this broader trend in corporate finance that is highly beneficial for investors, creditors, and stakeholders alike. Credit investors who navigate the complex landscape of corporate restructuring in an effort to create a win-win for the equity, company and creditors are the true value creators.

ESG Regulation Map and Timeline 🌎 ERM’s latest Global Regulations Radar provides an in-depth update on evolving ESG & EHS regulations worldwide, highlighting the increasing complexity of compliance requirements. Regulatory frameworks continue to expand, introducing stricter disclosure obligations and higher expectations for corporate transparency. Businesses operating across multiple jurisdictions must navigate these changes while ensuring alignment with global sustainability goals. The report underscores how new regulations are reshaping corporate accountability, particularly in areas such as climate risk reporting, supply chain due diligence, and environmental impact assessments. Regulatory bodies are introducing more standardized methodologies for sustainability disclosures, making data integrity and verifiability central to compliance. As expectations grow, companies must adopt more structured approaches to managing ESG-related risks and responsibilities. For organizations with global operations, these regulatory shifts extend beyond national boundaries. Requirements related to emissions reporting, sustainability claims, and biodiversity protection are influencing investment decisions, supply chain strategies, and competitive positioning. The increasing alignment of disclosure frameworks across regions signals a move toward greater consistency, but also demands careful adaptation to varying compliance timelines. ERM’s analysis highlights that many regulations are set to take effect within the next few years, requiring businesses to integrate compliance planning into strategic decision-making. Deadlines for mandatory disclosures, implementation of corporate due diligence requirements, and phased environmental targets will require companies to enhance their governance structures and risk management processes. Proactive adaptation will be key to maintaining regulatory alignment and mitigating potential business risks. As the ESG and EHS regulatory landscape continues to evolve, businesses must stay ahead of developments through structured monitoring and strategic planning. ERM’s Global Regulations Radar serves as a valuable resource for organizations seeking to understand the implications of regulatory changes and position themselves for long-term sustainability compliance. Source: ERM / The Global Regulations Radar #sustainability #sustainable #business #esg #climatechange #regulation #reporting

Rethinking the State’s Role in Insolvency   Insolvency is a coordinated process, with the Resolution Professional as the sutradhar. Market participants (primarily the Committee of Creditors and Resolution Applicants) are commercial decision-makers who bear the consequences. State agencies (primarily NCLT, NCLAT, and the Supreme Court) are facilitators, ensuring decisions conform to law.   Structural asymmetry is evident in the Bhushan Power and Steel case. The resolution process began on 26th July 2017, and market participants submitted a plan within six quarters, on 14th February 2019. State agencies then took six years to approve and eventually overturn the plan.   The law expects market players to act swiftly and decisively. Their decisions are final: a resolution applicant cannot submit a plan late or withdraw one, even if prolonged approvals render it unviable. In contrast, state agencies operate through hierarchical layers, each layer can revisit decisions of the one below, without timelines, even post-implementation.   Both sides must be subject to comparable standards of timeliness and finality. Insolvency approvals should rest with a single, professionally competent authority, whose decision is final. Where the authority fails to act within timelines, a system of deemed approval, like under the Competition Act, should apply. Approval must not be granted if any wrongdoing is noticed. However, if wrongdoing emerges later, persons responsible must face prompt and stringent penalties. But the transaction itself must remain untouched. This principle of finality should underpin all economic legal frameworks.   I elaborate on this further in a piece in the Financial Express: https://lnkd.in/gK6xd3zu

Most change initiatives don't fail because of the change that's happening, they fail because of how the change is communicated. I've watched brilliant restructurings collapse and transformative acquisitions unravel… Not because the plan was flawed, but because leaders were more focused on explaining the "what" and "why" than on how they were addressing the fears and concerns of the people on their team. People don't resist change because they don't understand it. They resist because they haven't been given a compelling story about their role in it. This is where the Venture Scape framework becomes invaluable. The framework maps your team's journey through five distinct stages of change: The Dream - When you envision something better and need to spark belief The Leap - When you commit to action and need to build confidence The Fight - When you face resistance and need to inspire bravery The Climb - When progress feels slow and you need to fuel endurance The Arrival - When you achieve success and need to honor the journey The key is knowing exactly where your team is in this journey and tailoring your communication accordingly. If you're announcing a merger during the Leap stage, don't deliver a message about endurance. Your team needs a moment of commitment–stories and symbols that anchor them in the decision and clarify the values that remain unchanged. You can’t know where your team is on this spectrum without talking to them. Don’t just guess. Have real conversations. Listen to their specific concerns. Then craft messages that speak directly to those fears while calling on their courage. Your job isn't just to announce change, but to walk beside your team and help your team understand what role they play in the story at each stage. #LeadershipCommunication #Illuminate

❓ How can countries with very high domestic debt avoid big financial problems and keep their economies stable? 👏 Congratulations to my dear colleagues in the IMF Debt Capital Markets Division Eriko Togo, Hui Miao, Shijia Luo, Myrvin Anthony, Marie Kim and Joe Kogan who worked hard to bring this IMF Working Paper on Domestic Debt Restructuring (DDR) to conclusion ahead of the IMF-World Bank 2025 Annual Meetings. In the WP they study seven domestic debt restructuring experiences: Argentina, Ghana, Sri Lanka, Barbados, Jamaica, Grenada, and St. Kitts and Nevis. 📊 Using detailed data, the paper shows that waiting too long to fix debt problems can make things worse and more expensive. ⏳💸 💡 The paper explains that simply restructuring debt is not enough. https://lnkd.in/e94iYHFn Countries need a strong plan that tackles the root causes of debt 🤝🌍. This research offers clear advice on how to handle creditors, read economic signals 📈, and time debt restructuring carefully to protect the economy and financial markets. It’s a practical guide to help countries navigate tough debt challenges. #SovereignDebt #DebtRestructuring #EmergingMarkets #IMF #DebtManagement #FinancialStability #EconomicRecovery

Cracks in European Private Credit? The European private credit market is showing undeniable signs of stress. But what’s happening beneath the surface is far more revealing than a simple "boom and bust" narrative. Headline default rates remain deceptively low (<2%), but this masks a wave of quiet, creative restructuring. 1/ The Rise of the "Quiet Swap": Debt-for-equity swaps are accelerating, but many are happening behind the curtain due to market opacity. Crucially, it’s not just challenged sectors—stress is emerging in previously "safe" havens like software and business services. Example: S&P downgraded solar-mounting firm Enstall Group to CCC, citing an unsustainable capital structure where EBITDA (€65-70 million) is vastly insufficient to cover €120 million in interest and redemption payments. 2/ Creative Workarounds Are the New Normal: Lenders are avoiding formal defaults through ingenious, consensual methods. > Amend-and-Extends: Maturity extensions are being negotiated to push-out imminent debt maturities. > PIK-Toggles: Deferring cash interest by paying-in-kind to ease liquidity crunches. > Covenant Resets: Proactively resetting covenant terms and thresholds based on revised business plans. 3/ The "Trust" Trick: A fascinating new structure is gaining traction: Sponsors place their shares in a trust, getting 12-18 months to turn the company around against strict milestones. If they fail, the trustee sells the shares for the lenders' benefit. This gives PE sponsors upside potential while saving lenders a painful enforcement process. Private credit is proving its value not by avoiding distress, but by managing it with patient, flexible capital. Loan defaults are rarely a cliff-edge—they are a "negotiated pause." This flexibility allows for value preservation over forced liquidation of borrowers. Krishank Parekh | LinkedIn #PrivateCredit #DirectLending #DebtRestructuring #PrivateEquity #EuropeanMarkets #Finance #Lending

MDR/IVDR Are Just the Tip of Your Regulatory Iceberg—Look Beyond Them A cornerstone of successful medical device development is identifying all regulatory requirements. The MDR (Regulation (EU) 2017/745) and IVDR (Regulation (EU) 2017/746) provide a vast catalog of device requirements and company procedures. Standards then offer additional details for compliance. However, many see this as the entire iceberg and assume it’s enough for full compliance. The reality is different. Medical devices and manufacturers often need to comply with multiple regulations. It’s crucial to identify all applicable regulations beyond the obvious ones. Here are 7 regulations and directives many miss but are often essential: EU AI Act (Proposal COM/2021/206) → Crucial for any medical device incorporating AI. → Adds a certification framework beyond MDR/IVDR. → Overlapping requirements mean a thorough gap analysis is essential. European Health Data Space Regulation (Proposal COM/2022/197) → Central to unlocking cross-border health data sharing in the EU. → A framework for primary and secondary use of electronic health data. → Compliance requires alignment with GDPR and national health laws. Radio Equipment Directive (2014/53/EU) → Applies to devices with wireless communication (e.g., Bluetooth). → EMC testing under MDR isn’t enough for compliance. → Requires additional IFU content, such as wireless frequency specifications. General Data Protection Regulation (Regulation (EU) 2016/679) → Applies to all devices interacting with personal data. → Covers even non-sensitive data, beyond health-related information. → Expected since its enforcement began in 2018. Battery Regulation (Proposal COM/2020/798) → Relevant for devices with rechargeable or disposable batteries. → Mandates user access to batteries for removal or replacement. → Requires compliance with labeling and recycling standards. RoHS (Directive 2011/65/EU) and REACH (Regulation (EC) No 1907/2006) → Limit hazardous substances in device materials. → Biocompatibility doesn’t guarantee compliance with these regulations. → Crucial during material selection for physical devices. WEEE (Directive 2012/19/EU) → Governs proper decommissioning and disposal of electrical devices. → Includes exemptions for implantable and potentially infectious devices. → Often Requires agreements with waste management organizations. By identifying them early, the iceberg may remain large, but at least you’ll have transparency and control. P.S. What other regulations or directives would you add to this list? ⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡⬡ MedTech regulatory challenges can be complex, but smart strategies, cutting-edge tools, and expert insights can make all the difference. I’m Tibor, passionate about leveraging AI to transform how regulatory processes are automated and managed. Let’s connect and collaborate to streamline regulatory work for everyone! #automation #regulatoryaffairs #medicaldevices

The way to get out of debt isn't by borrowing more. Do this instead: Debt can be a huge burden for a lot of people, especially when it's taken to fund consumerism. If you're in this position and ready to get out of debt, these are the steps I advise. 💡1. Understand why you got into debt in the first place. Was it due to lifestyle inflation, bad spending habits, funding education, or social influences? 💡2. Get organised. Make a list of everything you owe, to whom they're owed, the interest rate on each loan (or interest amount), minimum payments required and when you're expected to complete payment. 💡3. Get serious with your 'why'. Why do you want to get out of debt and why now? How will this decision affect your life and happiness? 💡4. Make lifestyle adjustments. ➡️ Figure out how much you can dedicate to repaying your loans monthly ➡️ Cut costs creatively and adopt a minimalist lifestyle. Think: Live Lean ➡️ Any expense that is not an absolute necessity should be cut off ➡️ Any extra savings from cutting off unnecessary spending should go into paying off more debt. ➡️ Set a realistic hard target for when this loan will be paid off ➡️ After each paycheck comes, pay debt first, spend what's left. ➡️ If you're actively investing, pause it, but don't sell off anything in your retirement account. ➡️ Always maintain a month's worth of emergency savings. You should save this first before paying off debt. ➡️ Do NOT borrow to offset another debt. ➡️ Find new ways to earn more money. Any extra cash will make reaching this goal quicker. ➡️ Stop comparing yourself to other people. ➡️ If you spent on things that can be substituted, sell them. It's more money to clear the debt. 💡5. Start tracking your spending. There are many good budget and expense trackers online. Pick a decent one and track every penny you spend for the next 30 - 90 days. This activity gives you a sense of accountability over your money, and you get clearer view of where you're sabotaging your efforts. 💡6. Finally, use one of two methods to pay off the debt: ➡️ Snowball Method - here you order your debt from the smallest to largest balance and work on clearing them in that order. Do not factor in the interest rate. ➡️ Avalanche Method - you order the debts from the one with the highest interest rate to the lowest (irrespective of the balance on them), and work on paying them off in that order. Neither is superior to the other, but I believe if debt is a behavioural problem for you, then using the snowball is better. Hope this helps you get some control. ----------------------- #Financefriday

What happens if a company is overleveraged? CFO, you move... It's time to start managing the debt 👇 No one likes to be handcuffed. That's what it feels like with too much debt on your balance sheet. CFOs are responsible for companies' capital structure. That means they need to manage the debt. Here are ten levers and 20 tactics they can use: Optimize debt structure Refinance for Savings: Refinance high-interest debt with lower-cost options like term loans or bonds. Lock in Stability: Shift to fixed-rate debt to minimize exposure to interest rate volatility. Improve cash flow management Speed Up Collections: Shorten receivables collection cycles through better invoicing processes or dynamic discounting. Negotiate Supplier Terms: Extend payment terms with suppliers while maintaining strong relationships. Leverage debt covenants Renegotiate Flexibility: Renegotiate covenants to allow greater operational flexibility during growth or downturns. Monitor Proactively: Track compliance with covenants closely to avoid penalties or default scenarios. Consolidate debt Streamline Loans: Merge multiple smaller loans into one facility for better terms and simplified management. Prioritize Payoff: Pay down high-cost debt first and consolidate the remaining debt into low-interest instruments. Diversify funding sources Tap Alternative Options: Explore private placements, green bonds, or mezzanine financing to spread risk. Expand Markets: Access international debt markets or hybrid securities for additional funding options. Monetize non-core assets Sell Idle Assets: Liquidate underutilized assets to generate cash for debt repayment. Lease Back Key Assets: Free up capital by leasing back essential assets after sale. Align debt maturity with cash flow Match Schedules: Restructure debt to match repayment schedules with predictable cash flow timing. Stagger Payments: Spread out maturities to avoid significant repayment burdens in a single period. Hedge interest rate risk Use Rate Swaps: Mitigate rate increases with interest rate swaps or caps. Secure Forward Rates: Lock in favorable rates using forward rate agreements (FRAs). Boost EBITDA Cut Costs: Implement cost-saving initiatives such as process automation or supply chain efficiencies. Grow Margins: Focus on high-margin product lines and pricing strategies to enhance profitability. Build relationships with lenders Foster Transparency: Share long-term plans to build lender confidence. Proactively Refinance: Regularly engage lenders to negotiate better terms as conditions evolve. ---------- What do you think about these levers and tactics? Do you have any other suggestions for CFOs on how to manage debt? ————— 📺 FinanceMaster on YouTube: https://bit.ly/4bSBut6 📢 Join our WhatsApp channel: https://bit.ly/3WWGOrc 👩🏫 Our LinkedIn Learning course: https://bit.ly/4a5fB9l 📻 FinanceMaster Podcast: https://bit.ly/3NLSt73 📄 FinanceMaster resources: https://lnkd.in/eC_zuCU4

𝐇𝐨𝐰 𝐂𝐨𝐦𝐩𝐥𝐞𝐱 𝐂𝐚𝐧 𝐕𝐂 𝐃𝐞𝐚𝐥𝐬 𝐆𝐞𝐭? Have you ever wondered how intricate a #VC deal can get? 𝑻𝒂𝒌𝒆 𝒕𝒉𝒆 𝒔𝒄𝒆𝒏𝒂𝒓𝒊𝒐: Fund X acquired a company with an Enterprise Value (EV) of $500 million, of which $200 million in equity and $300 million in debt. The debt has to be paid back in five years. If the company changes hands within those years, then the repayment is as follows: 👉 Year 1 - 110% par, 👉 Year 2 - 105% par, 👉 Year 3 - 103% par 👉 Year 4 - 101% par. From year 5, the repayment is 100% of the debt. Two years into operation, the company faces financial difficulties and cannot meet its debt covenants. Consequently, the market revalues the company at $350 million, which affects the company's debt value as well. Technically, the company should owe $309 million based on the year-two covenant, but the market has repriced this debt at $240 million. To rectify the debt covenant violation, the company has to repay $50 million. So, it must pay off $51.5 million ($50 million plus a 3% early payment fee) to reduce the debt to $250 million. Fund X doesn't want to invest more. The company looks for other investors and lands Fund Y. Fund Y agrees to invest $50 million in a participating preferred stock with a $50 million liquidation preference and 50% equity participation. For an extra $1.5 million to cover any penalties for paying back the debt early, Fund Y gets warrants on common corresponding to 5% of the total equity, with a $5 million strike price. This brings a nuanced equity structure into play: Fund X holds common equity, while Fund Y holds preferred equity and warrants. Moreover, Fund X retains veto power for the next two years, making it the ultimate decision-maker in the company's strategic moves. 𝐖𝐡𝐲 𝐝𝐢𝐝 𝐅𝐮𝐧𝐝 𝐗 𝐡𝐚𝐯𝐞 𝐯𝐞𝐭𝐨 𝐩𝐨𝐰𝐞𝐫 𝐨𝐧 𝐭𝐡𝐞 𝐬𝐚𝐥𝐞 𝐨𝐟 𝐭𝐡𝐞 𝐜𝐨𝐦𝐩𝐚𝐧𝐲? 1️⃣ Should Fund Y decide to liquidate immediately, the debt would be paid first ($257.5 million), leaving $92.5 million for equity holders. 2️⃣ The preferred stock from Fund Y gets $50 million first, and the rest ($42.5 million) is divided between the common and preferred. Warrants are worthless at this point. 3️⃣ On this first day, Fund Y would make $21.5 million, and so would Fund X. 4️⃣ But Fund X could've made at least $41 million ($350 Mn - $309 Mn) if they sold the company independently instead of teaming up with Fund Y. So, selling on Day 1 doesn't make sense for Fund X. Even though the company was struggling, Fund X could salvage some value by bringing in Fund Y. This setup allowed them to pay off some debt and stay in control of the company for the short term, limiting their potential returns. 𝐈 𝐚𝐦 𝐬𝐡𝐚𝐫𝐢𝐧𝐠 𝐭𝐡𝐢𝐬 𝐞𝐱𝐚𝐦𝐩𝐥𝐞 𝐛𝐞𝐜𝐚𝐮𝐬𝐞 𝐢 𝐰𝐚𝐬 𝐢𝐧𝐯𝐨𝐥𝐯𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐝𝐞𝐚𝐥 𝐬𝐭𝐫𝐮𝐜𝐭𝐮𝐫𝐞 𝐚𝐥𝐨𝐧𝐠 𝐰𝐢𝐭𝐡 𝐚 𝐕𝐂 𝐟𝐮𝐧𝐝. In my experience, VC deals aren't just numbers but dynamic plays where strategy, timing, and nerve hold the cards.