Hey Everyone,
I'm interested in learning about the 13-Week Cash Flow model that is used in turnaround/distressed situations. Does anyone have any good resources? I'm going to be interviewing for a role in our distressed group and I'm going to have to model it out. Would appreciate your help/advice.
Thanks!
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Distressed debt analysis: strategies for speculative investors
...in restructuring. It needs to match clients' less granular projections, which can be a SOB.
The best thing to do is try and model out a scenario yourself and think each step through. When preparing for Ch. 11, a company will surely owe plenty of money to all kinds of creditors, not just banks. When you build your projections you are assuming that all accrued debt is wiped clean(for now) and you are starting with a clean slate.
When you make your projections make sure every creditor is paid current from the petition date, even bank interest. What you are going to see is negative cash flow.
From there you want to calculate Debtor in Possesion (DIP) financing - basically how much you will need to stay afloat for the 13 week period, equal to your cumulative cash deficit.
Your cash balance each week should be exactly zero (or some minimum cash balance that you set).
Make sure you can input separate rates for the current bank debt, other accruals, and DIP financing.
If you do this and read up on Ch.11 cases, you should be fine.
Thanks for the responses and advice. I'll take a crack at the model as described and see what happens...
Thanks for sharing this post! The impact of global financial crisis brought numbers of bills, debts and bailouts to people and many investment companies. We dive so far into the world of debt that it becomes overwhelming, unmanageable, and plain out stressful. Believe it or not, if your debt has reached this point, you are not alone. One solution to this is debt consolidation. It is for when you have too many bills and the payments on your personal loans and other debts are getting to be too much. Debt consolidation brings all of these bills under one payment umbrella, and lowers the interest rate, and therefore payments. If you feel like you're drowning, and you have too many bills, then looking into debt consolidation is a far better choice than struggling paycheck to paycheck and worrying about short term loans to fill the gaps.
Cash flow (13 week forecast) (Originally Posted: 01/18/2014)
Hey guys, Is there any particular reason why its a 13-week cash-flow, as opposed to any number of weeks, why not 14 or 12 or any other number?
Thanks!
Because 13 weeks equal 3 months (52 weeks / 4) and you cant really forecast accurately much longer? Just a guess....
I don't know if you're asking for anything specific, but 13 weeks equals 3 months equals 1 quarter equals .25 fiscal year. You can forecast beyond that or less than that, doesn't mean it's more or less precise.
Yeah thanks I guess makes pretty much sense..
13 Week CF Model & Restructuring (Originally Posted: 03/08/2013)
How important of a skill is 13 week CF modeling ability in the restructuring advisory business?
Is this a model that is only used on the operational restructuring side of things or is this a skill that would be wise to develop for someone looking to get into distressed debt investing down the road?
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