Restructuring for investment banks is a niche yet misunderstood area of investment banking. Basically, it is related to companies that will soon face bankruptcy. Owing to the margin pressure cash issues, most of them want to reorganize themselves quickly with the help of a top investment bank. An investment bank can help them build their strategy and restructure their debt and equity financial aspects. Since investment banks have a crucial role to play in restructuring such companies, they may hire restructuring solutions for investment banks to streamline and accelerate the process.
Restructuring is an area with very limited information. Here is everything one needs to know.
What Does Restructuring Mean in Investment Banking?
Many people have a misconception that restructuring is related to companies beyond repair. However, in reality, it deals with companies that can be salvaged and have the potential to move forward by revising their capital structure. The primary goal of restructuring solutions for investment banks is to find a solution for both debtors and creditors to reorganize a company and set it up for success. Solution providers create a revised capital structure for the company, allowing it to turn things around or earn profit.
The Right Time for Restructuring
Many companies wait till the point of filing bankruptcy. However, that is not the best timeline for restructuring, as investment bankers often keep an eye on such companies. As a company gets closer to distress, the bankers make calls and pitch them to right-size their balance sheet. Companies should consider restructuring as early as possible to gain control over the process and find innovative solutions when they still have time. Solution providers approach a company even before its executives start realizing that they need to restructure.
Tell Tale Signs of Distress
Before approaching restructuring solution providers, it’s crucial to talk about the tell tale signs of financial distress. These signs include:
Diminishing Liquidity: Liquidity is of extreme importance when identifying a company in distress. Liquidity indicates runway and offers options in how a company may potentially restructure.
Maturity Walls: These are the dates by which a company’s debt will mature. A healthy company can refinance debt easily if its multiple obligations mature within the same year. However, a company in distress may find it challenging. Therefore, the inability to repay the debt often calls for company restructuring.
Levels of Debt Trading: A stock that trades poorly will soon be delisted and indicates that something is wrong. However, restructuring investment compliance solutions bankers are more concerned about the company’s Venture Capital Outsourcing structure and its debt trading levels. Healthy companies may trade their debt for short periods at significant discounts. However, restructuring bankers monitor a company’s debt trading levels across debt tranches and owners.
Now comes the most challenging part. Traditional deals have a formulaic structure. The real challenge is to model out companies over time and find the best price. Restructuring solutions for investment banks are complex and intensive, working with creditors to figure out the best gateways. Detailing possible restructuring permutations is a specialized task. That is why restructuring investment bankers turn to solution providers for pitching debtors appropriately.
