Business Turnaround, Borrowing and Restructuring
EQ acted for a client which, through a market downturn and resultant reduced asset values, had bank borrowing way in excess of asset values but with a trade that remained profitable. Our Corporate Finance team led discussions with the company bankers to set out the position that the bank debt had no hope of being repaid in full, although this was balanced with setting out a vision for increased profitability to give the bank an expectation of recovery.
How we helped our client
EQ’s turnaround experts initially considered the group’s debt levels alongside its profitability to assess what level of debt could be successfully serviced. We prepared a recovery plan with some detailed recommendations for enhanced profitability and debt reduction over a sustained period. Our Outsourcing team from Amber Accounting created a new reporting format to ensure that micromanagement took place for the group and that all of its separate trades were performing.
We met several times with the bank and our client to go over the recovery plan and to set the bank’s expectations accordingly and eventually agreed that a £5m debt write-off was acceptable. In exchange for this, our client restructured its group and brought in other previously debt and security free assets which improved the asset vs liability ratio. We then successfully renegotiated the terms of the remaining borrowing to ensure our client had an incentive to trade successfully and could see a future for the group
In restructuring the group, our EQ Taxperts ensured that no adverse tax consequences arose with tax losses being preserved and asset values maintained. Our client has been trading since that date on an increasingly profitable basis, with all debts being serviced as they fall due.
For more information or to discuss further, please contact our Transaction Taxperts.
For further information on outsourcing your financial function or getting assistance with Payroll, please contact our Amber Accounting department on 03182 312140.