Comments (9)

Feb 12, 2015

also interested

Feb 12, 2015

Bump interested as well

Feb 15, 2015

interested too, would really appreciate any insights, thanks!

Feb 15, 2015

in.

Feb 15, 2015

in.

Best Response
Feb 16, 2015

Yea, interested as well.

In the absence of someone providing an actual test we could build some assumptions on how that test would differ. I'd be curious to see others thoughts.

My experience in distressed is to always start with liquidation value which brings up the differences between OLV and FLV (orderly and forced) and the net, net value of both. What is the true reality facing the creditors and what can you make them believe? And how can you offer something better? After liquidation value, don't think much about the creditors who are out of the money.

Then the PE buyer figures out how far deep in the hole the business actually is (lights out, still operating, falling knife, etc), how much emotional damage has been done to all stakeholder parties? Can you turn supply chain, customers and employees back on? What leverage do you have with each party? What's the backlog and how much cash is needed to convert the backlog? Is it a sales or cost turnaround and how will you fix that? Sales TA's out of distress are really hard in reality. Build your proforma's to make sure it all makes sense.

Then, what legal structure? How do you flush all the 'out of the money' debt without a flurry of lawsuits afterwards? Can you do a friendly foreclosure, a prepacked 11, etc? You can save yourself tens or hundreds of thousands in legal costs with the right strategy and by doing the aftermath legal defense yourself.

Financing; what assets can you leverage for working capital and with whom? Where else can you get money to fund this venture? Then prepare the LOI for the secured creditor(s). For banks, understand how their balance sheet works with reserves and how your new debt might benefit them. Get the LOI signed and hit the gas.

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May 30, 2018

Adding to the list of interested's. Would be valuable to me as well.

I did find a Houlihan Lokey case study but I'm too new to post links, so Google 'Houlihan Lokey case study' if you want to find it (some value). It's not really a modeling test but it has the basics and thesis outlined (replying to above comment since the case study answers the process basically as far as it goes for the company, wouldn't necessary know what would 'show up' on a modelling test). Definitely worth a read, was pretty cool/interesting just in general.

Feb 19, 2015

Interested as well.

With the creditors - make sure you know their game. Some folks have in-house guys that can convert their debt-to-equity, credit bit, take board seats with the goal of making their money back and then some.

Other shops don't and are happy just to get out with whatever they can get.

May 31, 2018
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