Services

Contingency Planning & Insolvency

Helping stakeholders understand the alternative options and achieve the best outcome

Financial stakeholders often need a “plan B” in case their preferred solution falls through. That’s why contingency planning has become even more important, with more complex capital structures and volatile financial markets.

A well designed contingency plan identifies the drivers and relative costs and benefits between a consensual solution and an enforcement-based strategy.

Contingency Planning

While the causes of financial distress may differ, experience has shown the benefits of appropriate contingency planning in terms of value preservation.

Contingency planning is aimed at minimising (as far as possible) the adverse impacts on a company’s business following the appointment of an Insolvency Practitioner (“IP”). 

Our Restructuring Services team has deep situational experience across a broad range of industries and will bring in additional sector specialists and subject matter experts, including tax, from elsewhere within Deloitte as required.

Issues to consider include:

  • Security structure and sub-ordination
  • Enforcement rights
  • Impact of a formal insolvency on ability to continue to operate and possible value destruction
  • Stakeholder analysis
  • Development of mitigation strategies
  • Tax planning
  • Options review

The breadth of insolvency skills of the Restructuring Services team enables Deloitte to design detailed and viable solutions which can be delivered across borders, industries and processes.  The fundamental elements of our approach are:

  • Working alongside our advisory teams to establish alternative strategies;
  • Identify key concerns and manage the stakeholders throughout the process;
  • Work with tax and legal advisers to devise a practical implementation plan;
  • If appropriate, plan for short notice procedures (pre-pack administrations);
  • Delivery of the insolvency based solution.

Contingency Planning for Creditors

Any party involved in restructuring negotiations will want to understand the implications for them if a consensual agreement for a refinancing or restructuring cannot be achieved. 

For Lenders, this may include contingency planning to take control of the borrower in the event of deadlock with management or shareholders.

The situation is likely to be highly dynamic. 

A period of contingency planning may therefore run in parallel to restructuring negotiations.  Moreover the work streams are likely to be closely linked with the results of the contingency planning process informing the restructuring negotiations and vice versa.

Contingency Planning for Corporates

For directors, dealing with solvency issues can be extremely stressful especially given potential personal liability concerns. 

A realistic assessment of the position is required together with an evaluation of the available options.  Above all, directors should avoid the risk of sticking their heads in the sand.

Early dialogue with the company’s lenders may be appropriate in the event of potential or actual covenant breach.

Additional steps for a board to take in such circumstances would include taking professional advice including contingency planning in the event that agreement cannot be reached with the company’s financiers.

If caught early, this may result in the successful restructuring of the company or if not, and the company is forced into an insolvency process, then the board will have been seen to take appropriate action to protect value for creditors.

Contingency Planning – Financial Services

Our restructuring services practitioners have experience of all the major financial services restructurings over the past 7 years, including Lehman, MF Global and in relation to the Icelandic banking crisis. Clients include, central banks, regulators, bondholders and lenders.

Our approach brings together situational experience of our restructuring services team, sector expertise from our Financial Services practice and regulatory insight from the Deloitte Centre for Regulatory Studies.

Formal insolvency tools

We have a wide range of experience of the most frequently used insolvency tools:

Administration
Pre-pack’s
Company Voluntary Arrangements  (CVA)
Creditors Voluntary Liquidation (CVL)

More information on our formal insolvency services.

Our experience

In addition to our work in the UK, we have extensive experience in undertaking Liquidity Reviews and IBRs of borrowers with cross-border, multi-jurisdictional solutions in conjunction with colleagues in Deloitte member firms worldwide.

Author

Phil Bowers

Phil Bowers

Partner

Phil has over 20 years’ experience working on both formal insolvency assignments and performed complex security/option reviews and asset based insolvency valuations for lenders and other stakeholders.... More

David Soden

David Soden

Partner

David specialises in all aspects of corporate recovery including restructuring and insolvency advice and implementation. He has worked on a number of complex multi-jurisdictional cases for lenders in ... More