When a company faces liquidity issues, it has often breached a debt covenant, putting its lender on high alert. This situation often leads to the management of the troubled loan being transferred to a specialized group, such as the “Special Assets Group” or “Workout Group,” or the lender’s portfolio manager may continue to manage the loan through the workout process. During these critical situations, lenders often require an independent assessment of the borrower’s financial condition, liquidity, operations, and strategic alternatives to understand the severity of the situation and evaluate available options. Beechwood’s Lender Advisory Services include Independent Business Reviews (IBRs), liquidity assessments, financial forecasting, lender communications, and strategic advisory services. We leverage extensive industry experience and deep financial expertise to provide objective analyses, navigate complex lender-borrower relationships, facilitate transparent communication among stakeholders, and develop practical solutions that stabilize the financial situation, preserve enterprise value, and maximize recoveries.
Understanding the Current Situation
- Perform Independent Business Reviews (IBRs) to provide lenders with an objective assessment of the borrower’s financial condition, liquidity, operations, management, and strategic alternatives.
- Conduct interviews with senior management to gain a comprehensive understanding of the company’s financial position, operational challenges, and strategic objectives.
- Review and analyze credit facility documentation to understand key terms, assess debt covenants and reporting requirements, evaluate compliance, and identify potential risks.
- Prepare, validate, or analyze the company’s Thirteen-Week Cash Flow Forecast to evaluate liquidity requirements and financial stability.
- Evaluate the collateral securing the loan and identify any unencumbered assets that may be available to enhance recovery.
- Develop financial forecasts that project debt covenant compliance and anticipate future financial performance.
- Evaluate strategic alternatives, including turnaround and restructuring, refinancing, sale of the company, short-term performance enhancement, or an orderly wind-down and closure.
Interaction with Lenders
- Manage or assist with communications between the company and its lenders, including conducting in-person meetings.
- Prepare timely and accurate reporting packages to satisfy lender requirements and provide ad hoc reports and analyses as needed.
- Negotiate Forbearance Agreements and other critical terms with lenders, striving to achieve the best possible outcome for all stakeholders.
- Coordinate with the company’s and the lender’s legal counsel to facilitate efficient and compliant negotiations.
Credit Facility Optimization
- Review existing credit facilities to identify key terms, covenant requirements, collateral provisions, reporting obligations, and other provisions that may influence restructuring alternatives, and prepare executive summaries to support lender decision-making.
- Assist in negotiating new or amended credit facilities, including terms, rates, and covenants, that appropriately protect the lender while providing the company with a realistic opportunity to improve performance.
- Develop sensitivity analyses and financial forecasts to support restructuring negotiations and lender decision-making.
- Coordinate with legal counsel to help ensure negotiated agreements are properly documented and accurately reflect the agreed business terms.