Welcome to the second edition of From Red to Black in
which we analyse the critical developments in the Australian
restructuring market in FY16.
Our aim remains as it was last year – to provide you with
expert commentary on the key restructuring trends in FY16 and
outline our expectations for FY17. This review is aimed at everyone
involved in the turnaround process; from the boards of financially
challenged companies to the providers of the money (whether they be
traditional lenders, funds or debt traders) to insolvency
The Federal Government's promotion, as part of its National
Innovation & Science Agenda, of a safe harbour for directors to
strike a better balance between encouraging entrepreneurship and
protecting creditors is to be welcomed. But legislative reform is
not the only answer. It merely provides a process for change. For
restructurings to succeed, directors and management must accept the
cultural challenge of restructuring. Transparency, broader
stakeholder interaction, engagement with experienced outsiders and
a willingness to sacrifice the sacred cows of the business to
restore long-term value are each matters for a board and management
to deal with in order to make a restructuring plan work. Only then,
together with a change in the law, will innovation and
entrepreneurship thrive. We elaborate on this theme in The
prospect of a safe harbour.
We continue to be strong advocates for the value delivered to
companies whose boards embrace experienced restructuring
specialists being brought into situations well before the entities
become truly distressed. In The rise and rise of restructuring
plans we outline not only how the plans can be developed but
how to judge their success.
Much of the challenging restructuring work in the year under
review has emerged from the energy and natural resources sectors.
Atlas Iron is a great example of the benefits which flow
from the early engagement of restructuring specialists and we have
used it as a case study.
While the secondary market is firmly placed as a viable
"enforcement" option in distressed situations to be
weighed up against the long-term capital cost and uncertainty
associated with informal workouts and the stigma of formal
enforcements, there has been limited activity in the public space.
We analyse the reasons for that and explain the rationale for
growth in the private secondary market in Distressed –
the calm before the storm.
We also review the Good, the Bad and the Ugly in Australian
banking and a very interesting battle between the PPSA and
insolvency which has played out in a significant piece of
litigation in Victoria. As we did last year, we finish with some
bold Predictions for FY17.
We were delighted with the response last year to the inaugural
issue of From Red to Black. We hope that this edition is equally
well received. We are more than happy to discuss any of the issues
that we have identified and look forward to that discussion with
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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Courts, through judicial discretion, supervise the proposed transition from winding up to a deed of company arrangement.
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