Is The Capital Structure Appropriate For The Business Today?
In the current economic environment, many businesses may be constrained from fully achieving their strategic goals as a result of their existing banking facilities which are no longer appropriate. Covenants may have been set:
at a level which did not provide sufficient headroom for the current downturn in trading; oron a basis which was too rigidly defined sometime ago and is no longer relevant to the current business operations.
The challenge today is not only to define the optimal capital structure for the business going forward but also to ensure that the companys debt facilities have sufficient flexibility for its operations while also ensuring that the lenders have appropriate security and controls in place.
Typically, this will begin with a review of the companys business plan and financial forecasts, both on a cashflow and asset-backed basis. This yields an understanding of the nature of any pressure on the company, the timeframe in which a solution is required and the debt capacity and future financing requirements of the company.
It is then appropriate to review the options available to deliver an optimal capital structure, which may also include a review of potential non-core business units. An accelerated disposal of such businesses can often be a more efficient source of capital and may even create some covenant headroom if they are in a loss-making position. The ultimate financing strategy may range from a relatively straightforward covenant amendment through to a restructuring, injection of additional capital or refinancing of existing facilities.
In the case of the latter, injecting competitive tension into a process remains the most likely method to ensure that best terms are achieved. In the current environment, effective strategies are required to mitigate the substantial increase in pricing (both bank arrangement fees and ongoing margins) that are now being sought.
An independent debt advisory firm can greatly facilitate this process.A team that has wide ranging banking experience that has lived and breathed debt in both the corporate and leverage finance markets. We have a clear understanding of key market trends, whether raising new debt or amending existing debt facilities, such as movement in pricing and structures, changes in key terms and conditions and the development of loan documentation.
The approach results in effective, bespoke solutions allowing clients to focus on their core business. The debt advisors should offer independent, impartial advice and hands-on experience in all areas of the transaction process, including:
Financial analysis and modellingBusiness plan assessment and preparationAccessing and analysing market information, trends, multiples, pricing and comparablesDue diligence scoping and reviewAll party negotiations (comprising management teams, shareholders and lending institutions) including loan documentation review and negotiations.
Freelance editor, writer. Interest includes writing on capital structure, corporate finance, role of debt advisors, finance advisors, pensions advisory
at a level which did not provide sufficient headroom for the current downturn in trading; oron a basis which was too rigidly defined sometime ago and is no longer relevant to the current business operations.
The challenge today is not only to define the optimal capital structure for the business going forward but also to ensure that the companys debt facilities have sufficient flexibility for its operations while also ensuring that the lenders have appropriate security and controls in place.
Typically, this will begin with a review of the companys business plan and financial forecasts, both on a cashflow and asset-backed basis. This yields an understanding of the nature of any pressure on the company, the timeframe in which a solution is required and the debt capacity and future financing requirements of the company.
It is then appropriate to review the options available to deliver an optimal capital structure, which may also include a review of potential non-core business units. An accelerated disposal of such businesses can often be a more efficient source of capital and may even create some covenant headroom if they are in a loss-making position. The ultimate financing strategy may range from a relatively straightforward covenant amendment through to a restructuring, injection of additional capital or refinancing of existing facilities.
In the case of the latter, injecting competitive tension into a process remains the most likely method to ensure that best terms are achieved. In the current environment, effective strategies are required to mitigate the substantial increase in pricing (both bank arrangement fees and ongoing margins) that are now being sought.
An independent debt advisory firm can greatly facilitate this process.A team that has wide ranging banking experience that has lived and breathed debt in both the corporate and leverage finance markets. We have a clear understanding of key market trends, whether raising new debt or amending existing debt facilities, such as movement in pricing and structures, changes in key terms and conditions and the development of loan documentation.
The approach results in effective, bespoke solutions allowing clients to focus on their core business. The debt advisors should offer independent, impartial advice and hands-on experience in all areas of the transaction process, including:
Financial analysis and modellingBusiness plan assessment and preparationAccessing and analysing market information, trends, multiples, pricing and comparablesDue diligence scoping and reviewAll party negotiations (comprising management teams, shareholders and lending institutions) including loan documentation review and negotiations.
Freelance editor, writer. Interest includes writing on capital structure, corporate finance, role of debt advisors, finance advisors, pensions advisory
Article Source: http://www.synarticles.com/authors/11947/jim-damon
