Insights Special Situations
Understanding the Capital Structure Before a Restructuring
Every restructuring is a negotiation between parties whose positions are already determined by the documents they signed. Knowing precisely what those documents say is the starting point, not a detail to confirm later.
The map before the proposal
Before any restructuring proposal is credible, the capital structure has to be understood as it actually stands — not as it is generally remembered.
That means establishing what is owed, to whom, on what terms, secured against what, ranking where, with what covenants, what defaults may already have been triggered, and what rights each of those positions confers.
What the analysis has to establish
- Every obligation, its tenor and its true cost including fees and penalties
- Security: what is charged, to whom, and whether charges are exclusive or shared
- Ranking between lenders and any inter-creditor arrangements
- Covenants, events of default and any that have already been breached
- Guarantees — corporate and personal — and what they expose
- Obligations that are not financial debt: statutory dues, operational creditors, disputed claims
Ranking determines leverage
In a restructuring, outcomes follow priority. A secured lender with exclusive charge over a critical asset has a different set of options from an unsecured creditor, and both will behave accordingly.
Understanding where each stakeholder sits explains why they are taking the position they are taking — and which proposals could realistically be accepted rather than merely presented.
Timing
This analysis is most valuable before positions harden. Once defaults have accumulated and stakeholders have committed publicly to a stance, the range of workable solutions narrows.
Embee supports debt assessment, restructuring strategy, refinancing discussions, lender engagement, settlement strategy and stakeholder coordination.
