Corporate Restructuring: Lessons from ExperienceMichael Pomerleano, William Shaw In the wake of the periodic financial crises of the late 1990s, the international financial institutions and many experts have recognized the need for a strategy to avoid and mitigate the severity of crises in the corporate sector. Addressing this problem requires the complementary efforts of policymakers, regulators, lawyers, insolvency experts, corporate restructuring specialists, and financiers. What are the roots of corporate distress? Can systemic corporate crises be predicted? What is the role of legal frameworks in preventing and coping with a crisis? What are the most effective financial techniques for dealing with distressed corporates? This timely volume takes a multidisciplinary perspective on corporate restructuring, and examines international experiences in dealing with corporate crises. |
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agencies agreement analysis Asian asset management companies balance sheet Brazil cash flow chaebols collateral committee contingent claims approach corporate debt corporate restructuring corporate restructuring vehicles corporate sector cost countries court creditor rights crises crisis Czech Republic Daewoo Danaharta debt restructuring debt-for-equity debtor default distance to distress distress barrier East Asia EBITDA economic equity example exchange financial institutions financial restructuring financial sector Financial Supervisory Commission firms FOBAPROA foreign framework funds IBRA Indonesia insolvency interest rates International International Monetary Fund investment investors IRCJ Istanbul approach KAMCO Korea leverage liabilities liquidation London approach losses Malaysia ment Mexico million negotiations nonperforming loans note holders OpCo operational restructuring option out-of-court workouts percent public sector ratio recapitalization recovery resolution restructuring banker restructuring process risk role secured creditors shareholders swaps Thailand tion transaction U.S. dollar unsecured World Bank
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Page 211 - Malaysia is a good example of a country where the authorities are well aware of the challenges of managing the pressures that result from high growth and of maintaining a sound financial system amidst substantial capital flows and a booming property market.
Page 327 - ... levels. An informal process is far more likely to be sustained where there are adequate creditor remedy and insolvency laws. The informal process may produce a formal rescue, which should be able to quickly process a packaged plan produced by the informal process. The formal process may work better if it enables creditors and debtors to use informal techniques.
Page 375 - ... on property of the estate shall be allowed or disallowed under section 502 of this title the same as if the holder of such claim had recourse against the debtor on account of such claim, whether or not such holder has such recourse, unless (i) the class of which such claim is a part elects, by at least two-thirds in amount and more than half in number of allowed claims of such class, application of paragraph (2) of this subsection; or (ii) such holder does not have such recourse and such property...
Page 326 - Principle 24, with the heading 'International Considerations' goes: 'Insolvency proceedings may have international aspects, and insolvency laws should provide for rules of jurisdiction, recognition of foreign judgments, cooperation and assistance among courts in different countries, and choice of law'. In its explanation it reads (under nr. 180): 'The most effective and expeditious way to achieve these objectives is enacting the UNCITRAL Model Law on Cross Border Insolvency'.
Page 328 - The court should be organized so that all interested parties - including the administrator, the debtor and all creditors - are dealt with fairly, objectively and transparently. To the extent possible, publicly available court operating rules, case practice and case management regulations should govern the court and other participants in the process. The court's internal operations should allocate responsibility and authority to maximize resource use. To the degree feasible the court should institutionalize,...
Page 13 - Lee, this volume). Restructuring refers to several related processes: recognizing and allocating financial losses, restructuring the financial claims of financial institutions and corporations, and operational restructuring of financial institutions and corporations. Recognition involves the allocation of losses and associated redistribution of wealth and control. Losses — that is, differences between the market value of assets and the nominal value of liabilities held by financial institutions...
Page 322 - Principle 11 - Governance: Management A. In liquidation proceedings, management should be replaced by a qualified courtappointed official (administrator) with broad authority to administer the estate in the interest of creditors. Control of the estate should be surrendered immediately to the administrator except where management has been authorized to retain control over the company, in which case the law should impose the same duties on management as on the administrator. In creditor-initiated filings,...
Page 320 - Establish a framework for cross-border insolvencies, with recognition of foreign proceedings. Principle 7 — Director and Officer Liability Director and officer liability for decisions detrimental to creditors made when an enterprise is insolvent should promote responsible corporate behavior while fostering reasonable risk taking. At a minimum, standards should address conduct based on knowledge of or reckless disregard for the adverse consequences to creditors. Principle 8 - Liquidation and Rehabilitation...
Page 328 - ... supervisory role in the rehabilitation process. The court/tribunal or regulatory authority should be obliged to accept the decision reached by the creditors that a plan be approved or that the debtor be liquidated. Principle 28 -Performance Standards of the Court, Qualification and Training of Judges Standards should be adopted to measure the competence, performance and services of a bankruptcy court. These standards should serve as a basis for evaluating and improving courts. They should be...
Page 326 - ... to the court on the status of implementation and progress during the plan period. A plan should be capable of amendment (by vote of the creditors) if it is in the interests of the creditors. The law should provide for the possible termination of a plan and for the debtor to be liquidated. Principle 23 Discharge and Binding Effects To ensure that the rehabilitated enterprise has the best chance of succeeding, the law should provide for a discharge or alteration of debts and claims that have been...