The sooner a company’s problems can be identified, the easier they are to resolve. The company’s most significant problems should be established before the process of developing a solution begins. Other problems that emerge during the transaction also need to be resolved effectively. Very often the eventual solution addresses only symptoms, or only some of the company’s difficulties, with the consequence that a further restructuring is necessary soon afterwards. In more extreme cases, the company fails. In addition, the solution should be robust enough to withstand uncertainties and accommodate contingencies. Financial restructurings should be seen as ‘once and for all’ solutions.
Finally, but perhaps most importantly, the right people must be involved in a restructuring, and the right relationship exist between them, for a loan workout to succeed. Apart from the quality of the company’s management, the calibre, experience and training of the bank staff involved in the workout, as well as those of the advisors, are also critical. This also includes the personal relationships between the company’s management, the bankers and other creditors. A restructuring is unlikely to be successful without the confidence of all parties in each other’s ability and integrity.