Restructuring When Cash Flows are Tight and Debt Covenants are Constrained

Restructuring When Cash Flows are Tight and Debt Covenants are Constrained


Global economic uncertainty, rising competition and general market illiquidity have created a volatile business environment for many companies. Protecting entity value by focusing on the long-term strategies and performance of your company is more important than ever.


The recent credit crunch, depressed valuations and shifts in interest and foreign-exchange rates are creating a new set of operational and financial challenges for companies that were once stable and profitable. Companies are tightening their belts and reassessing their priorities to improve financial performance and avoid a potential bankruptcy filing.

Despite all of the best efforts, outside and unforeseen forces often make the decision to restructure inevitable. When that time comes, timely recognition and efficient design of a financial restructuring program that addresses the issues confronting the company and its constituents are key to preserving and enhancing the entity’s long-term value.

These situations can be stressful for management, which is often embroiled in day-to-day operational decisions. In such circumstances, management and the organization can benefit from the assistance of a third-party professional to evaluate the situation independently, provide new perspectives and assist in the development of a successful strategy for reorganization.

Among the key indicators that management’s discussions should include the possibility of restructuring are:

  • Operating losses
  • Financial difficulty of key customers or suppliers
  • Disintegrating lender relationships
  • Change in credit rating
  • Significant downturn in operations
  • Recent financial restatements or allegations of fraud, causing lender fatigue
  • Debt covenant violations

Challenges and Opportunities

When not addressed properly, financial distress can lead companies to make decisions that cause potential harm to their value. Companies that are proactive in managing through uncertain times become empowered to focus on opportunities, mitigate challenges and put themselves in a position to emerge viable, profitable and with a competitive advantage. Timely management of the situation is key to the company’s ultimate success.

While these challenges require a broad approach, the components of a strong management response that will create long-term success include increasing working capital, strengthening balance sheets, reducing costs and creating a plan for improved operational management.

Our Point of View

Early identification and thorough assessment of a problem combined with a quick response are vital for business survival and growth. Amid financial distress, it is imperative to develop and implement effective plans to create operational and financial stability as quickly as possible. The complex issues involved in these challenging situations necessitate solutions to restore business value in the shortest possible time. These solutions must be created through close collaboration among management, the board of directors, creditors, employees and customers to devise and execute a successful restructuring plan.


How We Help Companies Succeed

Protiviti has the ability to manage and lead the decisionmaking process for companies facing uncertain outcomes or potential bankruptcy. Our professionals possess the experience and knowledge to identify the problems as well as the capabilities to assist in making critical decisions quickly to improve a company’s stability.

In addition to serving as advisor and chief restructuring officer, we have served in the roles of CEO, COO and CFO. These experiences allow us to bring a practical yet fresh perspective to any situation and provide current management with unbiased, in-depth analyses of the company’s strengths and weaknesses in order to identify and implement achievable solutions.

Protiviti’s turnaround services include:

  • Right-sizing infrastructure
  • Bank loan refinancing
  • Strategic planning
  • Management or creditor communication
  • Liquidity management
  • Financial projections


We provide the appropriate combination of industry and functional expertise to develop innovative and practical solutions to restore a company’s viability, profitability and credibility. Following are two recent examples of our successful work.

  • The restatement of financial statements for a $4 billion retailer/distributor led to various covenant defaults. Protiviti assisted the client’s management in negotiating with replacement lenders, which resulted in the client obtaining more favorable terms and higher asset advance rates than initially offered. As a result, the company was able to avoid a bankruptcy filing.
  • We assisted a top subprime mortgage lender and loan servicer in managing the risks associated with a major liquidity crisis. Our team worked with the company’s management, counsel, investment banker and lenders to develop multiple operational and financial strategies. As a result of our efforts, the company was able to effect an out-of-court restructuring, thus avoiding bankruptcy.


Suzanne Roski
Managing Director
[email protected]
Guy Davis
Managing Director
[email protected]

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