Four takeaways from the 2023 Restructuring Forum

20 December 2023

In November, over 50 delegates joined us at the fantastic Reed Smith offices for R3’s first in person Restructuring Forum. Reflecting on recent case studies and thinking about the future of restructuring, delegates were treated to a range of sessions interspersed with delicious food.

In this blog we share some key takeaways from the event.

1)      SME Restructuring Plans (RPs), still not viable?

In a panel chaired by Eilish Cassidy there was a lively discussion on the relative merits of CVAs and RPs for mid-market firms. While RPs can provide large firms with the certainty of a court sanction the cost involved and the risk that the RP will be challenged in court means that it can be a hard sell to directors and creditors alike. There was plenty of debate around making RPs more attractive, including moving to a one hearing model, but all the panellists agreed that advisors need to launch the restructuring process much earlier, often by the time a RP is suggested it is already too late.

2)      Interest rates starting to bite?

Interest rates have been high (at least in terms of the last decade) for almost a year now, but the expected wave of insolvencies seems not to have arrived yet. However, panellists on the session hosted by Louise Durkan on the Future of Restructuring highlighted some intriguing trends that might not appear in the monthly insolvency statistics.

When interest rates are high we might expect companies in the real estate and construction industries to struggle where high debt is part of the business model and when money becomes more expensive margins get squeezed. However one of the panellists suggested in their recent experience the companies that were coming under pressure tended to be owned by private equity and therefore much more heavily leveraged than their peer companies.

3)      Directors haven’t been here before, and they need help!

Ultra-low interest rates have been here for so long that many directors, and even advisers, haven’t experienced a sharp rise in the cost of money before. This means that they need more help than ever from restructuring professionals in making sound financial decisions. While we would always like directors to engage earlier with creditors, businesses are often not engaging until they are already in a liquidity crisis by which point their options are very limited.

4)      The days of saying “I don’t do crypto” are over

In the last few years, crypto-assets have gone mainstream. Retail investors are increasingly holding small amounts of an enormously wide variety of coins, tokens and other digital assets. Some companies are even accepting payment in some of the more popular coins. All this means that IPs are going to come across digital assets more and more often and need to be prepared on what to do when they do come across them. The most important practical thing IPs can do is to have a plan for what they will do when you find crypto assets before you start an investigation. Line up specialist custodians, asset tracers and investigators before you need them. Crypto-assets are effectively bearer bonds so you have to take custody of them asap, it is crucial to be proactive and move fast otherwise you may any digital assets have long since disappeared.