Restructuring

CFA General
#1

Does anyone know what the restructuring department in a big 4 firm actually does?

#2

Have you seen the most recent article in Mergers & Inquisitions? It’s a good interview informing how someone from big 4 restructuring transitioned to IBD, and provides some insight into what people do there. http://www.mergersandinquisitions.com/big-4-restructuring-to-investment-banking/

#3

right now, pretty much nothing - sits around waiting to not get laid off by an audit partner

#4

Did some stuff for restructuring department while at big4. It was nothing great, did mostly restructuring opinions that were presented to banks and owners. Some projects involve implementation of cost cutting measures and such, but again you just write reports. Also we were pretty big on liquidity and bank reporting. Quite honestly it was pretty much a joke and a way to charge huge fees.

#5
  • IBRs - Independent business reviews of distressed companies (the main purpose of these reviews is to answer two question: what led the company to stressed situation and is there a way out) - evaluation or restructuring options (building a model -> running different scenarios -> evaluation of pros and cons of outcomes -> writing a report) - what is known as cash work (producing short-term cash flow forecasts for stressed/distressed companies, monitoring the company’s cash performance against the forecast etc.) - post restructuring monitoring (covenants calculation, monitoring of cash flows, review of forecasts etc.)
#6

Can I ask what exactly is meant by “cash flow monitoring”? I understand in principle what happens when companies violate their covenants and what the consequences of those things are, but what does someone in big 4 restructuring do when that happens? Or is their goal to try to prevent stuff like that from happening? I admit I don’t really know what these people do on the day-to-day so I’m curious to understand what the value chain is like.

#7

Numi, Cash monitoring work is only performed when a Big 4 company advises lenders (e.g. a group of banks or a syndicate in case a loan was syndicated etc). In the role of lenders’ advisor, a big 4 company usually process raw data on cash movements of a borrower to conclude whether all requirement of restructuring agreements were complied with (e.g. restrictions on capex, restrictions on transactions with related parties, restrictions on intercompany borrowings. For one of the companies I worked with there were restrictions on the share of cash held with certain banks, share of cash held abroad etc.). If a big 4 company finds a violation, it discusses it with lenders, legal advisors of the restructuring deal and with the company itself to determine what further steps need to be taken. Usually this is very boring and monotonous work for the person who deals with it in practice. p.s. While writing this post I got my results: L2 passed! Congratulations to those who passed and do not give up to those who did not.

#8

Thanks for the explanation Alexander and congrats on passing L2!