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External support to restructure companies in Greece

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Daniel Bruellmann
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Taking advantage of recent changes for viable businesses.

Feb­ru­ary 8th 2016, Dr. Daniel H. Brüll­mann, www.arranger.ch,

After notic­ing in a pre­vi­ous paper that the improved Greek legal frame­work for insol­ven­cies, which still seems dys­func­tion­al in some aspects, and the recent recap­i­tal­iza­tion of banks open oppor­tu­ni­ties to com­pa­nies and entre­pre­neurs to restruc­ture their busi­ness­es, we address some of the steps to under­take for either out-of-court or in-court restruc­tur­ing to save long term sur­vival of a viable business.

The bur­den of cred­i­tors to opine on the finan­cial sit­u­a­tion, the via­bil­i­ty of the busi­ness and whether and how the mea­sures shall affect the sat­is­fac­tion of the stake­hold­ers can be reduced pro­duc­ing clear and trans­par­ent proposals.

A viable turn­around con­cept with a coher­ent strat­e­gy and detailed mea­sures shall thus address the cri­sis sit­u­a­tions, and con­vince stake­hold­ers that it can be imple­ment­ed suc­cess­ful­ly to pro­vide improve­ments for the stakeholders.

A neu­tral view is vital to find even cre­ative mea­sures favor­able to all. An exter­nal team com­ple­ment­ing busi­ness restruc­tur­ing, legal and audit­ing skills and qual­i­fi­ca­tions can effi­cient­ly add resources for an unbi­ased analy­sis of the sit­u­a­tion and the imple­men­ta­tion of urgent mea­sures. It can also medi­ate con­ver­gent solu­tions accept­able to the par­ties even fol­low­ing unpro­duc­tive negotiations.

It might sound need­less to say, but cred­i­tors want to recov­er as much as pos­si­ble of their claims and they need to be con­vinced that they will. Cred­i­tors may not renounce to any of their rights, but they might have to accept lim­i­ta­tions in order to max­i­mize the amount of repay­ments which they can rea­son­ably expect.

How can we con­vince cred­i­tors that they can improve their sit­u­a­tion? What have we to pro­duce and explain? What else do we have to do, in order to estab­lish such confidence?

As Law exten­sive­ly sug­gests in chap­ter sev­en of the insol­ven­cy code for Reor­ga­ni­za­tion, we shall pro­duce detailed infor­ma­tion about the finan­cial state of the com­pa­ny, caus­es, assets, lia­bil­i­ties and cash posi­tion as well as any infor­ma­tion of eco­nom­ic or noneco­nom­ic nature that could affect it to allow for a com­par­i­son of sat­is­fac­tion of the stake­hold­ers accord­ing to restruc­tur­ing sce­nar­ios and that based on liquidation.

We shall describe cor­po­rate struc­tur­al changes, orga­ni­za­tion­al changes and oper­a­tional pro­grams, financ­ing, and mod­i­fi­ca­tions to the rights of involved stake­hold­ers such as con­ver­sion of claims to shares for the suc­cess­ful con­tin­u­a­tion of the busi­ness or its trans­fer and how to ensure the imple­men­ta­tion of the pro­posed measures.

This has to take into con­sid­er­a­tion a safe assess­ment of the rights and gen­er­al legal posi­tion of every cred­i­tor, depend­ing on the class of insol­ven­cy cred­i­tors to which one belongs, or of oth­ers involved in the plan with­out being a cred­i­tor, which will influ­ence any mea­sures such as for­give­ness of debt, reduc­tion or pay­ment in instal­ments of claims, waiv­er or restric­tion of a lien or secu­ri­ty, as well as the posi­tion of the debtor in ful­fill­ing the plan and the result­ing obligations.

How­ev­er, such bank­rupt­cy pro­ce­dures are com­plex and time con­sum­ing and one might want to avoid them.

To pro­duce such and bet­ter alter­na­tives thor­ough­ly, we must be sure to:

  • Exam­ine the details of the sit­u­a­tion and define long term strate­gic oppor­tu­ni­ties of the business.
  • Assess the inter­ests of all stake­hold­ers. A broad view can inspire alter­na­tive strate­gic scenarios.
  • Pre­pare solu­tions tru­ly favor­able to all stake­hold­ers interests.
  • Define oper­a­tional restruc­tur­ing mea­sures such as strate­gic re-posi­tion­ing, asset focus­ing and key man­age­ment changes.
  • Define con­trol to insure implementation.
  • Com­mu­ni­cate to the stake­hold­ers in a plain, trans­par­ent, under­stand­able and con­vinc­ing form.

Such prin­ci­ples apply to either out-of-court or in-court solu­tions such as the rat­i­fi­ca­tion of restruc­tur­ing agree­ments approved with the major­i­ty of cred­i­tors. In more rad­i­cal cas­es of Spe­cial Liq­ui­da­tions, where the busi­ness or viable parts of it shall be put on sale at auc­tion, a spe­cial focus has to be put on build­ing up the demand or an ade­quate and accept­able acqui­si­tion vehicle.

Should it nev­er­the­less come to a bank­rupt­cy pro­ce­dure, the gath­ered infor­ma­tion might be quite use­ful, not least for an even­tu­al acqui­si­tion of assets.

In any case, a com­pre­hen­sive under­stand­ing of pos­si­ble results of an insol­ven­cy pro­ce­dure helps us to pro­pose and nego­ti­ate bet­ter out-of-court solutions.

Of course, imple­men­ta­tion is not easy and con­fi­dence might ini­tial­ly be scarce, but viable busi­ness­es have to con­sid­er also deci­sive actions to assure their long term survival.

Over indebt­ed com­pa­nies can­not find any financ­ing for their oper­a­tions, as no lender in his mind is ready to share repay­ments with exist­ing creditors.

A re-estab­lish­ment of a sus­tain­able debt lev­el is thus a pre-con­di­tion to avoid con­tin­u­ing death of eco­nom­ic activ­i­ty even if in bet­ter mar­ket con­di­tions, improved liq­uid­i­ty, avail­abil­i­ty of equi­ty and buy­ers for non-core assets improved.

Our expe­ri­ence shows that the extent of entan­gle­ment and per­son­al lia­bil­i­ties span­ning from intra­group rela­tions to post-dat­ed checks is often underestimated.

Prob­lems and solu­tions can be sides of the same medal.

Restruc­tur­ing works best if employed ear­ly on, not in despair. We thus rec­om­mend­ed a time­ly action