Careers in Restructuring
What exactly is restructuring and what does the role involve?
Restructuring can be split into two categories. Financial Restructuring and Operational Restructuring.
Financial Restructuring involves situations where there is a level of debt held by a company or country that is either unsustainable or at risk of being unable to be serviced, repaid or refinanced in accordance with its terms. As a result separate financial and legal advisers are employed by relevant stakeholders to the situation, such as the company and lenders, to negotiate and implement a solution to avoid insolvency.
There can be many different solutions, ranging from financial covenant amendments, deferral of interest and repayment dates (“amend to extend transactions”) where more time is required for a refinancing, to in the case of more fundamental over-leverage, equity injections, divestments and more wholesale redesigns of the company’s capital, corporate and ownership structures such as debt for equity swaps in which lenders take some degree of ownership of the business in return for renegotiation or reduction of debt. Each solution is unique to the business requirements and is generally the result of complex negotiations between often multi-party stakeholders.
A deep understanding of business plans, cash flow and liquidity, valuation techniques, negotiation strategies, debt documents and restructuring implementation mechanisms is required, amongst other skills.
Lead financial advisers in restructuring transactions typically take the lead role, assessing the situation, determining options and the optimal solution for their clients and then leading negotiations to achieve these objectives. They will also play a lead role in managing the process towards completion and co-ordinating other advisers.
A deep understanding of business plans, cash flow and liquidity, valuation techniques, negotiation strategies, debt documents and restructuring implementation mechanisms is required, amongst other skills. There is a meaningful degree of overlap with M&A competencies and as a result restructuring teams often sit within the Corporate Finance arm of investment banks.
Legal advisers will assist in a detailed assessment of the capital and corporate structure; assessing rights and remedies through the debt documentation and helping design the legal implementation structure. They will work closely with the FA in order to maximise strategic leverage in negotiations and will then lead the documentation and legal implementation of the transaction.
Operational Restructuring is more focused on business improvement and in optimising corporate operations, processes and structures and is generally a separate discipline.
What are the main considerations for someone thinking about a career in financial restructuring?
I would recommend learning as much as possible about restructuring and what it entails. Try to speak to people in the industry and review