Case study
Preserving value in a complex restructuring
Preserving value through detailed analysis and advice. A pan-African PwC team helped unpick a complex restructuring proposal and negotiate a better deal.
Pan-African multilateral trade finance institution. As our client’s exclusive debt restructuring advisor, our joint Nigerian and South African team helped to preserve value for our client.
Industry: Financial services
Services: Financial Restructuring
Country: South Africa
Client challenge
Our client had extended credit to a pan-African Banking group that faced financial difficulties and was facing likely default. The group was looking to exit the market through a sale of its subsidiaries in countries which included Mozambique, Zambia, Botswana, Tanzania and Rwanda. The net proceeds of the disposal process were to be applied towards settlement of outstanding debt obligations owed to our client and other creditors of the group.
The Group had put forward a restructuring proposal that had been negotiated with a number of other creditors but appeared unfavorable to our client. In particular, there was a lack of clarity regarding the impact of the restructuring proposal on our clients position, including:
- the quantum, timing and risks associated with the proposed repayment plan
- the liquidity needs of the group and excess cash available to repay creditors
- the value and the timing thereof that could be realised from the disposal of the group companies
In addition, there was a limited understanding of the rights, risk and ranking of our clients claim relative to other creditors.
Given the complexity of the proposal, our client had limited capacity or the full range of experience to assess their position, rights and options available.
We were appointed by the client to unpick a complex restructure to determine whether they should consent to the proposed offer.
Approach
Our joint Nigerian M&A team and South African Capital Advisory and Restructuring Services team provided the following services:
- Review of the restructuring proposal
- Legal structure and legal agreement review
- Review of cash flow forecasts
- Financial outcome (payment waterfall) modeling
- Options analysis
- Contingency planning, insolvency action or disorderly liquidation
- Valuation of entities earmarked for disposal
- Negotiation of our client’s position and proposed de-risking
- Project management as lead adviser to our client including assistance with internal consent processes
- Liaising with hold out creditors within the lender group
- Input to and review of new short form legal agreements
Impact
We improved the ranking of our client’s claim in line with their rights and negotiating position.
In financial terms this resulted in an up-front cash payment upon signing up to the restructuring proposal and in addition, the solution facilitated another 20% repayment within the first 6 months.
It also spread the anticipated recovery from the five different asset disposals as opposed to it being payable / concentrated in one high risk asset. In addition, further credit enhancement was obtained through a parent company guarantee that provided access to residual cash in the event where secured creditors have been fully repaid.
We provided the necessary capacity, skills and restructuring knowledge to help the client identify the relevant areas where value could be preserved and supported them in negotiating a better position.
We were able to identify our client’s rights and areas of concern, and assess their relative negotiating position. We used these insights to focus internal and external stakeholders on the few key matters that would reduce risk and deliver higher value for our client. We provided more than just bandwidth, we identified where the value was and negotiated an improved position for our client.
Contact us
Johannes Grove
Director | Medical Schemes Industry Leader, PwC South Africa
Tel: +27 (0) 11 797 4044
