One of the members of Baqqit attended the Debt Restructuring event delivered by Mr. Paul Leggett, Director of Debt Restructuring Services at Deloitte Middle East. The event was hosted by the CFA Society Emirates and was held at the Emirates Towers on the 28th January 2018.
The agenda of the event was to discuss Debt Restructuring, current themes in the market and talk about various case studies that have prompted corporations to re-negotiate their exposure.
First, Mr. Paul outlined the importance of corporations to assess their yearly performance and explained the various stages of stress the firm faces over a period of time.
He further commented about the management’s early identification of lower than expected performance gives them an opportunity to re-think the lower points of the year and re-assess what could be done to achieve the set goals of the company.
Negligence to this can lead companies to slowly see their cash flows being affected followed by installments being defaulted. Covenants agreed with Financial Institutions will be breached and the company will be very soon looking forward to restructuring their debts.
“Timing is Important and in such scenarios, it can be a difference between bankruptcy & profitability”
The session then talked about scenarios where Financial Institutions or Lending Partners can foresee a likely debt restructure and can take a step ahead to recover the exposure early rather than holding on and having no options in the end but to count it as a bad debt.
In addition, Financial Institutions need to constantly be in sync in analyzing the key risk parameters of the business. Failure to do so will create stress during annual performance review where the Financial Institution would be forced to reduce their exposure or exit the case due to non-performance.
Restructuring of limits is not a pleasant situation for any company and major control of the pivot of the company depends on the support provided by Banks in such recoveries. Ideally, Banks always have to strike a balance!
We had a great understanding of Debt Restructuring and it was great to hear personal instances of Mr. Paul on various debts restructuring dilemmas along with the impact of the same on distressed corporations.
Thanking the CFA Society – Emirates for hosting such topics.
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