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financial restructuring

When businesses and their lenders enter into debt agreements, there is generally a sound correlation between the borrower’s historical and projected operating performance and the agreed upon debt structure.  When business performance falls short of expectations, it is often necessary to realign the debt structure with the borrower’s ability to meet its debt service obligations.  This can become a challenge when debt levels already exceed the business’ ability to meet its obligations or maintain its debt covenants.

Pivotal Strategies’ professionals have often worked with our clients and their lenders to smoothly transition into revised capital structures.  While we represent our clients’ interests, we strive to keep an objective stance and assure that the relationship between our clients and their lenders remains positive and constructive.  We prepare credible financial forecasts that realistically reflect our clients’ projected financial performance.  Where applicable, we also incorporate the likely results of operating initiatives put in place to improve our clients’ operating and financial performance.  We use these in negotiating a debt level, capital structure and migration plan that is achievable, without severe disruption to our client’s business, and supportable by its antici-pated level of performance.  We also communicate with all constituents to assure that the new structure is acceptable to all relevant stakeholders.

The ultimate structures and migration plans vary widely depending on the circumstances of the business, but  may include the following:

·   Temporary lender over-advances and/or relaxed principal and interest payments

·   Subordination of senior debt

·   Conversion of some or all debt obligations to equity

·   Sale of non-core businesses or under utilized assets in order to reduce debt levels

In those rare instances where the relationships between our client and its lenders become permanently impaired, we assist our client in refinancing with other available debt or equity sources.  Through our successful restructuring efforts, our clients are left with workable capital structures tailored to the needs of their businesses.

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