I recently attended a national panel presentation involving a workout consultant, a banker and an attorney. Yes, it sounds like the start of a joke, but this group discussion was spot-on as to what “restructuring professionals” see on a day to day basis. Some take-away thoughts:
1. We are 10 years into a time of economic expansion, which included multiple rounds of QE leading to very low interest rates. There is now a lack of experience in younger professionals who have never lived through a down cycle. When it returns, things will be rough and you will need someone who has seen it all before.
2. Early signs of trouble: Liquidity is tight and you don’t know why. There are “paper profits” but no liquidity/no cash on hand. There are multiple unexplained staff departures, especially in the financial department. COD. More vendor calls every day.
3. “Restructuring Professionals” are often unwelcome at the business. When cash is so tight, how can an owner justify an outside professional? What they do bring are some skill sets, and best-case is prior experience in your industry. Consultants have training to spot and analyze trends; implement management controls; undertake operational analysis and efficiencies. But if you can’t communicate with them, then there will be ongoing tensions that may not be capable of being overcome. Remain open to input.
4. “Preserving optionality” is a fancy buzz word for not waiting too late. The sooner you come to discuss options with restructuring professionals, the more options there may be. When you are calling your banker for an over advance to make this week’s payroll, it is never good.
5. Top level owners and management are often fearful of the “messaging” if they bring in outside help. What is often more true is that the vendors, employees, and mid-level management are all relieved, because trust us, they DO know that something is going one….. they may lack all the details, but they know it and are pleased if someone will step up to the plate and deal with it.
6. Lenders are comforted by proactive action. It is much harder to turn on a dime to try to maximize outcomes.
7. Cash is King. Say it loud, say it proud. It is Rule #1, and also rule numbers 2-5 too. Getting some longer term pricing “bargain” and burning up current cash to do so is not the right move. Without cash there is no ability to continue.
8. Internal interviews will slowly develop the issues list, as the same problems will keep coming up in conversations. Communications plans are very important. Internal and external messaging, updates and transparency. Some lawyers who lack restructuring and bankruptcy experience don’t understand this, as it goes against a litigator’s normal type of practice.
Call us. We have seen it all before, therefore we can help you chart a course of action.
About DelCotto Law Group
DelCotto Law Group is Kentucky’s asset protection law firm known for its commitment to the lifetime success of its clients. With offices located in Lexington, Louisville and Danville, DLG serves Kentuckians with complicated financial matters, especially in the areas of bankruptcy, complex litigation, and estate planning. For more information about filing bankruptcy or DelCotto Law Group, please call (859) 231-5800, email firstname.lastname@example.org or reach us on our contact page.