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Introduction to Debt Capacity

Debt capacity is an analysis conducted in determining what is the sustainable level of debt for a company. Debt capacity is a very important concept to understand in credit. As such, debt capacity is the first thing they teach in the training manual for corporate and commercial bankers – how much

Distressed Debt Overview

Introduction to Distressed Debt Similar to all other aspects of finance and investing, distressed debt investing means higher risk and higher reward. Distressed debt is in itself a very unique asset class that falls under the jurisdiction of alternative asset managers – primarily hedge funds. Although debt markets are very large

Restructuring Advisory

Investment Banking - Financial Restructuring Advisory When Do Debts Need to be Restructureed? For the layman, financial restructuring is required when the capitalization of a corporate is not appropriate for the economic value of the firm. When an investment bank’s restructuring advisory arm is involved, this always means that the balance sheet is

Incurrence Covenants for High Yield Bonds

Senior Debt Covenants (Maintenance and Financial Covenants) and Protections A covenant is a vow - positive covenants or covenants of a positive nature (do not commit fraud, file your financial statements no later than 60 days after the end of a fiscal quarter) commit an obligor to do something. Negative covenants

Options for Distressed Debtors: Selling the Corporate and Bankruptcy

In a previous post, we discussed refinancing and restructuring options for a corporate. Sometimes, the restructuring and refinancing options do not appease creditors and they may look for a sale. For the more senior creditors, assuming that the company is only slightly underwater, they do not care that much about the

The Restructuring Process for the Distressed Company

Stakeholders in Financial Distress and the Distressed Landscape When a company is distressed and runs into difficulties being able to meet debt service, restructuring is required with options ranging from a refinancing to liquidation of assets. Now it has been upheld in a court of law across various developed legal systems that

Restructuring Group in Investment Banking

Introduction to Financial Restructuring Advisory Restructuring (or "RX") is the product group in the investment bank that deals with stressed, distressed and bankrupt debtors. Generally, this means corporate debt, but on occasion we have seen governments go bankrupt - from the municipal level to countries such as Greece or Argentina. Restructuring is

Chapter 11 Bankruptcy – Financial Restructuring

The Unlevered Firm and Financial Restructuring When companies that are unable to meet debt service but have value in continuing as a going concern, it is generally to the benefit to all stakeholders as well as the economy that the company maintains operations while it restructures. Going back to corporate finance theory,

Debt Refinancing Options for Issuers

The finance world is awash with debt. Corporates and governments regularly issue debt in order to fund operations and capital initiatives. However, debt can often become a problem for many reasons. Many circumstances can cause a debtor or borrower difficulties in servicing debt. We will start from the more benign to the more

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