Restructuring in investment banking refers to the process of reorganising a company's financial and operational structure to improve its financial performance or resolve financial distress. This can involve a range of activities, including debt refinancing, cost-cutting measures, asset sales, and restructuring of operations.
Restructuring may be necessary in a range of situations, including:
Financial distress: When a company is struggling financially, restructuring may be necessary to help it regain stability and avoid bankruptcy.
Changes in business strategy: When a company decides to change its business strategy or divest non-core assets, restructuring may be necessary to align the company's financial and operational structure with its new strategy.
Mergers and acquisitions: When a company is acquired or merged with another company, restructuring may be necessary to integrate the two companies' operations and financial structures.
Restructuring banks offer a range of services to support companies through the restructuring process, including:
Financial advisory: Restructuring banks provide financial advisory services to help companies assess their financial situation and develop a restructuring plan. This may include analysis of cash flow, debt structure, and operating performance.
Debt restructuring: Restructuring banks help companies to restructure their debt, including renegotiating loan terms, refinancing debt, and raising new capital.
Asset sales: Restructuring banks help companies to identify and sell non-core assets to generate cash and improve their financial position.
Operational restructuring: Restructuring banks help companies to optimise their operations and reduce costs through measures such as workforce reductions, facility closures, and supply chain optimisation.
One example of a restructuring deal in investment banking is the restructuring of Puerto Rico's public debt by Evercore. In this deal, Evercore advised the government of Puerto Rico on restructuring its public debt, which had reached over $70 billion. The restructuring involved a complex negotiation with bondholders and creditors, resulting in a debt reduction of over $20 billion and the creation of a new public debt entity.
Another example of a restructuring deal that Evercore was hired to assist with was Avianca Holdings, a major Latin American airline, where it advised on its financial restructuring in 2020. Avianca Holdings was facing significant financial challenges due to the COVID-19 pandemic and other issues, and Evercore was tasked with developing a comprehensive restructuring plan to help the company stabilize its finances and continue operating. The restructuring involved negotiations with creditors and other stakeholders, as well as the implementation of cost-cutting measures and other initiatives. As a result of Evercore's efforts, Avianca Holdings was able to successfully complete its financial restructuring and emerge as a stronger, more sustainable company.
Evercore was also involved in the financial restructuring of Cineworld, a major cinema chain that was struggling with the effects of the COVID-19 pandemic. Evercore was hired to advise on the restructuring, which involved negotiating with lenders and other stakeholders to secure additional financing and restructure the company's debt. The restructuring also involved the closure of certain locations and other cost-cutting measures. As a result of Evercore's work, Cineworld was able to successfully navigate the challenges of the pandemic and emerge as a stronger and more sustainable company.
These three examples highlight Evercore's expertise in financial restructuring, as well as the firm's ability to develop customized solutions to help companies navigate complex financial challenges. Evercore's reputation as a trusted advisor in the restructuring space has made it a go-to firm for companies seeking to stabilize their finances and emerge stronger from difficult situations.
Another example of a restructuring deal is of the restructuring of Toys "R" Us by Lazard. In this deal, Lazard advised Toys "R" Us on its restructuring plan, which involved closing stores, selling non-core assets, and renegotiating debt. Despite these efforts, Toys "R" Us ultimately filed for bankruptcy in 2017, highlighting the challenges of restructuring distressed companies.
In conclusion, restructuring is a complex and challenging process that requires significant financial and operational expertise. Restructuring banks offer a range of services to support companies through the restructuring process, including financial advisory, debt restructuring, asset sales, and operational restructuring. With the increasing complexity and volatility of global markets, we can expect to see continued demand for restructuring services in the coming years.
