Debtor
Restructurings are time critical situations each with unique challenges, complicated by the diversity of stakeholder groups, particularly in cross-border situations or those involving public companies and/or government institutions. These situations can be further pressurized by cash constraints, working capital erosion and security restrictions.
Corporations in such financial or operational distress inevitably are confronted with crisis events. It is critical in such situations to deal with the underlying problems in an appropriate, transparent, timely and effective manner.
We have advised companies in distress, across a range of industries, through crisis, working capital stabilization, and financial/operational restructurings. We will lead manage the restructuring process whether it is a voluntary out of court restructuring or through a court appointed administration process such as an Indonesian PKPU, a Singaporean or Hong Kong scheme or other processes.
Our restructuring and turnaround services include:
- Advising on formal and informal debt restructurings including: (i) Schemes of Arrangement; and (ii) Indonesian Suspension of Debt Payment processes (PKPU)
- Advising on financial crisis management and facilitating communications across all critical stakeholders
- Working capital stabilization and cash management
- Conducting operational and financial reviews and assessing sustainable debt levels and structures
- Managing interim situations and turnarounds (Chief Restructuring Officer or other Interim Directorships) during and post restructuring including:
- Developing and reviewing operational and structural cost reduction initiatives and implementation/execution of milestones
- Evaluating and implementing revenue enhancement opportunities
- Implementing restructuring schemes/plans
- Divesting assets
Case Study
Project Shariah Restructuring
December 2017- Type of Case :
- Debt Restructurings and Turnaround Management
- Title :
- Voluntary Restructuring of Conventional and Shariah Syndicated Debts
- Status :
- Closed December 2017
- Value :
- USD 91.25 million
PROJECT OVERVIEW
- The Company is a gas processing player with capacity of 140 MMCFD as well as providing gas compressing service to PJB’s 920 MW gas fired power plant. Company’s revenue is highly depending on global Saudi Aramco contract price (CP Aramco).
- Sharp decline of CP Aramco between 2014 – 2015 forced the Company to shut down its gas processing plant as it was operating below its economics value.
- The Company has outstanding debts of USD 91.25 million from syndicated banks comprised of a European bank, two local conventional banks, and two local shariah banks.
- In early 2017, AJCapital were introduced by the syndicated banks to the Company to restructure its defaulted conventional and shariah debts.
PROJECT ISSUES
- The syndicated banks and the Company completed its first debts restructuring in 2015, however, it was failed in less than 2 years. The failure was mainly due to lack of understanding of CP Aramco volatility price and over expectation of customer’s gas volume take up by the Company.
- Lack of trust by the syndicated banks to the Company created harsh negotiation between the parties. During the negotiation process, the majority lender decided to lock up Company’s operational bank account, hindering the Company ability to pay its operational expenses.
WHAT WE DID
- First phase of our assignment was to produce an Independent Business Review (IBR) report to the syndicated banks. Key highlights of our IBR report includes: (i) Company’s historical performance and financial position; (ii) cash available for debts service and for the next 10 years with various sensitivity on the CP Aramco price and production volume; (iii) potential recovery rates on various options available to the syndicated banks; (iv) business recommendation to achieve successful turnaround of the Company; and (v) debt restructuring principal for the parties to consider.
- We produced a regression model to forecast CP Aramco prices that well accepted by the syndicated banks and the Company as one of the key revenue driver in the financial model.
- We constantly defused tensions between the parties by providing sensible solutions that bring back all parties back into the negotiation table, including a solution to open the Company’s operational bank account that prevent the Company to shut down its gas processing plant.
- We proposed a sustainable restructuring plan that includes cash waterfall mechanism and volatility of CP Aramco price, that enable the Company to accelerate its principal repayment and at the same time maintain Company’s ability to service its minimum commitment to pay interest and principal.
- We advised and monitored the negotiation of the key commercial terms between the syndicated banks and the Company, including providing solutions to bridge the requirement gap as mandated by the shariah law.
- We managed and coordinated all parties (including legal counsels and notary) the execution of restructuring documents that includes conventional and shariah terms sheets and facility agreements, account management agreement, inter-creditor agreement and security documents.
PROJECT OUTCOME
- All parties signed a-10 years restructuring agreement with cash sweep mechanism build into the plan.
