Serious mistakes are usually made while businesses are still profitable.
Failing to secure financing which can be maintained in the long-term, using unrealistic financial projections or delaying optimization of working capital and superfluous assets may lead to excessive indebtedness or even insolvency.
Companies which, for whatever reason, lose their profitability are often in the difficult situation of not being able to implement new projects. Banks will soon be talking a slightly different language as borrowers.
Quick action will then be overdue: securing and managing liquidity and financing, improving profitability and conserving value.
Strategic and operating measures to improve earning power should be defined and implemented by those who know and will lead the business in the future. However, they usually get absorbed in fighting symptoms. In such situations it is often useful to involve external specialists to take urgent financial measures and demonstrate to the lenders the eligibility for financing of individual businesses and projects.
Among first measures, we put in place a Turnaround Dashboard collecting most relevant information to separate value creation from destruction and setting priorities for measures to be implemented along a restructuring plan while optimizing solvency with the help of a liquidity contingency plan until securing longer term financing.
A third party may also be useful to mediate between the borrower and lender convergent solutions acceptable to both parties when negotiations are getting nowhere, or to arrange adequate alternative refinancing through different measures and instruments.
Debt moratorium or refinancing with debt cancellation can make sense also for creditors in the context of a restructuring and recapitalization.
