Trends in Bankruptcy and Restructuring

Despite better industry leadership, economic recovery efforts and some recent upticks in the stock markets, the economy will continue to struggle in the near term before conditions stabilize and improve. There will be more bankruptcy filings, and the courts, law firms and restructuring advisors will remain busy for a while.


26 May 2009

The global economic crisis is nothing new today, nor is the corresponding increase in businesses fighting for their very existence. For instance, when I searched Google News for articles last Friday referencing "bankruptcy" or "restructuring" In their headlines there were 400+ unique results. But from my perspective, the constant media buzz on the topic obstructs the most interesting and beneficial (yes, I said beneficial) trend: The increased openness of ideas and sharing of best practices regarding corporate bankruptcy and restructuring.

In previous "boom" years, when a troubled few companies failed it was seen as temporarily newsworthy but these more sporadic events were not taken as an opportunity to examine or change the way things are done. Bankruptcies and corporate restructurings were a relatively quiet and accepted practice for those that "couldn't cut it," while everyone else went about their business.

Things have changed. This year, as I attended conferences that focused on restructuring and bankruptcy, I noticed that industry professionals are re-examining the way this process works-and more importantly, are looking to improve it. At the Inside Counsel SuperConference in Chicago, I shared my perspective on a panel (aptly) named "When Bad Things Happen to Good Companies: A Bankruptcy and Restructuring Roadmap for the General Counsel." The title itself signifies that current sentiment isn't focused on letting economic Darwinism play out but rather on how companies can best face and weather the coming storm.

More generally, the buzz in bankruptcy and corporate restructuring circles is on effective and proactive communication. For companies forced to work with creditors and shareholders on the difficult process of restructuring, the advice today is simple: Regardless of your role or objective, communicate early, often and in the right way to ensure a better process. Companies in such a crisis mode need to achieve complex, multiple goals in these situations - from avoidance of liquidations and fire sales to more importantly addressing the underlying problems facing the business- in order to ensure longer-term prospects and enhance the economic outcome for all stakeholders.

Yet given the various players (creditor committees with varied agendas, legal teams) and time pressures involved in restructuring, organizing and disseminating key business information can be time consuming and costly for those managing the business. (Not to mention creditors who are often dealing with multiple situations in this environment.) Increased levels of organization, security and control have been noted by many in this new era of restructuring as essential in keeping parties productively engaged.

Restructuring Graph

As one senior restructuring advisor recently told me: "You can't wait for everyone to weigh in on how these things are going to be run. You're in trouble if you have all these people standing around trying to figure out how to communicate instead of how to fix the business and secure the right financing." The secret is out of the box; those in the know have a plan to better communicate. From the numerous meetings with key players in the bankruptcy/restructuring world I have had recently, I hear again and again that there is no time to waste in the process and that a coordinated, communicative approach is necessary now more so than ever before.

Despite better industry leadership, economic recovery efforts and some recent upticks in the stock markets, the economy will continue to struggle in the near term before conditions stabilize and improve. There will be more bankruptcy filings, and the courts, law firms and restructuring advisors will remain busy for a while.
In the meantime, there are clearly right ways and wrong ways to do certain things, and knowing the difference in your particular situation can be the difference between emerging as a reorganized, stronger company and disappearing completely.

Look for a broader perspective on these trends in Intralinks' upcoming survey/whitepaper in association with Mergermarket called "Restructuring Today: A white paper on trends and issues in today's restructuring market." Also, check out the Wall Street Journal's Bankruptcy Blog for a good source for staying up on the trends and news in the industry.



Matthew Porzio

Matthew Porzio

Matt Porzio joined Intralinks in 2003. As SVP Marketing & Strategic Business Development, he is responsible for managing and driving the strategic direction for Intralinks Dealspace including virtual data room and full deal lifecycle solutions for the M&A, Private Equity, Advisory, Corporate Development and Restructuring communities. Before joining Intralinks, he was a senior associate at Metzler, a German advisory firm, focused on cross-border M&A transactions.