UK: The Different Stages Of A Debt Restructuring Transaction And The Role Of The Agent

Last Updated: 5 October 2006
Article by Stelios Manetas

First published in Global Securitisation and Structured Finance 2006, published by Globe White Page. All rights reserved.

When a company announces a debt restructuring, this is in most cases the result of an extensive analysis of its debt portfolio involving important economic, legal, tax and accounting decisions. A debt restructuring is therefore a high-profile event, and it is crucial to the financial future of the company that the whole process is handled with great care and efficiency. This chapter illustrates the different stages of a debt restructuring and, more specifically, debt exchanges and tender offers, and provides some insight into the role of the agent.

Debt exchange

A debt exchange is a proposal by a company to its security holders that they exchange their existing obligations for new securities and, in some cases, a pre-defined cash element. Any new securities offered may be issued by the same company or by one of the company’s subsidiaries.

A company may decide to make an exchange offer for several reasons – for example:

  • to improve on the terms and conditions of the existing bonds;

  • to pre-refinance maturing debt;

  • to improve its liquidity position by extending the maturity of its existing debt; or

  • to change the market for its debt.

Tender offer

A tender offer indicates the company’s intention to purchase its existing obligations from the market for cash. The cash amount offered to participating security holders is usually calculated as a spread over the yield of government bonds or similarly trading corporate bonds. A variation on the basic tender offer is the ‘modified Dutch auction’, whereby security holders are invited to propose a price at which they are prepared to tender their debt based on the yield of a specified debt instrument, which will not be calculated until the expiration of the tender offer. Bids above the final purchase price are rejected or scaled back depending on the subscription levels of the transaction.

Companies may undertake a tender offer – for example:

  • to utilise an excess cash position on the balance sheet;

  • to reduce total company debt; or`

  • to improve their tax position without triggering debt extinguishment or for other reasons.

Sometimes a tender offer is combined with a consent solicitation. This is where a company requests the consent of its security holders to remove undesired covenants from existing debt, which, for example, may have been assumed in an acquisition or may have been issued when the company was in a weaker financial position, in order to harmonise the terms and conditions of its debt portfolio.

On other occasions a company may combine a tender offer for part of its debt with a debt exchange for the remainder.

Finally, there are situations in which a company’s debt restructuring options are limited, especially in the case of distressed or defaulted (Company Protection Act) debt. In these cases, schemes of arrangement are more likely to be put in place.

As transactions vary, so do the parties involved in them; but generally in a restructuring transaction the working parties would include the dealer manager or advisory bank (company advisers) together with co-leads on more complex transactions, the company’s agent (exchange/ tender/solicitation agent), financial experts (eg, accounting firms and investment advisers) and their respective counsel. The lead dealer manager is often appointed at the outset of the transaction, followed by the relevant financial experts, the legal counsel and the co-leads. The final piece of the transaction jigsaw is the appointment of the agent, who plays an integral part in the success of the transaction.

Restructuring transaction stages

Typically, a restructuring transaction is carried out in two stages: planning and implementation.


The restructuring process is ready to begin as soon as the company advisers have been appointed.

Stabilisation: During the initial stages of a transaction, priority is given to identifying and remedying key pressure points within the company, and reviewing existing debt agreements and other key contractual arrangements with investors. Once this process is complete, the preparation stage can commence.

Preparation: The business is reviewed and, if necessary, strategic and operational changes are suggested. The implementation of strategic and operational proposals is usually carried out by consultancy firms and industry experts, while understanding the security holders’ motivations remains the responsibility of the company advisers.

Once the results of the review are available, the company advisers can formulate restructuring plans and present their proposals, which, subject to the company’s approval, leads into the implementation of the restructuring proposals.

It is at this stage – after the restructuring proposals have been accepted by the company and prior to the launch of the restructuring – that the agent is engaged by the company or the company’s advisers. Its primary role is to act as a liaison between the securities clearing systems, the security holders (or clearing system participants), the company and its advisers, to facilitate prompt and accurate delivery of information throughout the transaction. To achieve that, the agent needs to ensure that the transaction documentation reflects the correct market procedures, and it therefore needs to negotiate and agree the participation procedures with the relevant clearing systems. These are categorised as either international central securities depositories (ICSDs) or central securities depositories (CSDs).

ICSDs – The ICSDs are clearing and settlement systems for internationally traded securities. They provide cross-border securities services to banks, broker/dealers, custodians, agents and other institutions. There are two ICSDs: Euroclear Bank SA/NV and Clearstream Banking SA. The ICSDs provide the operating platform used by their participants to trade and settle securities and cash. The agent uses this same platform to settle securities and distribute cash to security holders that participate in a given restructuring transaction. If a transaction is taking place only within the ICSDs, the procedures to be adopted for their participants (the security holders) will be very similar.

CSDs – Unlike the ICSDs, the CSDs are clearing and settlement systems for domestic market securities. CSDs usually trade all types of securities in their domestic market, including government bonds, treasury bills, commercial paper, corporate bonds and warrants. However, in some cases they may only trade government bonds and locally listed securities. In the latter scenario, the agent must make sure that procedures for the holders of securities traded outside the clearing systems (or through another mechanism) are properly defined in the transaction documentation.

The CSDs provide securities services to banks, broker/dealers, custodians and other institutions in a local market, and usually maintain settlement and trading links with the ICSDs. Some of the principal CSDs are Switzerland’s SIS/Sega Intersettle AG, the United States’ DTC, Italy’s Monte Titoli, Spain’s Iberclear and Austria’s OeKB. The CSDs maintain trading platforms that agents and participants can use to settle securities during a restructuring transaction. In most cases the cash element of the transaction is processed outside the CSDs. National banks usually provide cash accounts linked to security accounts at the CSDs. Securities held in the CSDs are usually in dematerialised or immobilised form.

Irrespective of whether the transaction takes place in an ICSD or CSD, there are three possible ways for the agent to settle the restructuring in the clearing system on behalf of the company:

  • internally, when the security holders (participants) and the agent/company maintain accounts in the same clearing system;

  • via a bridge, when the security holders maintain accounts in different clearing systems; and

  • externally, when the security holders maintain their accounts in the local markets.

Generally, an agent will look at the transaction proposals, determine which markets the securities trade in and ensure that all the relevant procedures are reflected in the transaction documentation. It is also the agent’s responsibility to ensure that the clearing systems have properly set up the restructuring process and that CSDs and central banks are aware of the forthcoming event.


(This section refers to international transactions. Local market transaction stages may differ according to local market guidelines and targeted bondholder groups.) The implementation stage is divided into four phases: pre-offering, commencement of the offer, offer period and expiration/settlement of the offer.

Pre-offering: Prior to the restructuring becoming public, the transaction documentation is prepared (eg, transaction prospectus, newspaper notices, listing/delisting requests). The company works closely with its advisers, the appointed agent and legal counsel to ensure not only that the transaction documents reflect market procedures and restrictions, but also that they communicate clearly the company’s offer to the market. At this stage the agent also undertakes to pre-advise the relevant clearing systems of the forthcoming restructuring process. Negotiations will also start between the clearing systems and the agent to agree the content of the electronic notices to be sent to the security holders. Once the transaction documentation has been agreed, the offer is ready to commence.

Commencement of the offer: At the commencement of the transaction, to encourage participation, the agent coordinates the distribution of the offer documents to the security holders and/or the clearing systems.

Offer period: During the offer, the agent acts as a single information source for security holders regarding entitlement and participation procedures.



It examines documents and instructions from the security holders, such as letters of transmittal, physical certificates, electronic blockings and guaranteed delivery instructions; checks for validity and correctness; and compiles the ‘participating holders’ list. Reports on participation levels and reconciliation progress are provided regularly, and can be designed to meet the specific needs of the company or its advisers.

Expiration/settlement of the offer: At the expiration of the offer, the agent performs the final reconciliation of the debt presented by the security holders in the restructuring. It confirms with the clearing systems that all the bonds have been blocked and that any physical deliveries of bonds have been processed.

When all the checks have been performed, the agent communicates the final position to the company’s advisers. Depending on the level of take-up and the terms of the restructuring, the agent may be directed by the company’s advisers to scale back the restructuring by an agreed percentage. The agent calculates the positions to be accepted in the restructuring and those positions to be returned to their original holders. After the amount of the restructuring has been agreed, the agent liaises with the company’s advisers for the pricing information. Once the pricing has been confirmed, the agent calculates the individual consideration due to each security holder whose debt has been accepted in the restructuring and pre-advises the clearing systems of the relevant cash positions. The agent also arranges for the press releases announcing the results of the restructuring, together with the final pricing, to be distributed to the investors through the clearing systems or financial news providers (eg, Bloomberg, Reuters, WM Datenservice).

On the settlement date, the agent arranges for the payment of the individual considerations (new securities, cash or both) to the clearing systems. Finally, the agent arranges for the cancellation of the restructured securities or their delivery to the company.

Other services an agent can provide in a restructuring transaction include the distribution of broker compensation (in certain markets), foreign exchange services for companies that maintain debt in a different currency to that of their country of incorporation, and escrow services for compulsory tender offers, schemes of arrangement or for funds received on pre-closing.



Case studies

The following two case studies are examples of types of transaction that Deutsche Bank has worked on as agent in the past.

Case study 1 – media company

A media company launched an offer to exchange two classes of its €200 million senior notes due 2007 for new senior notes due 2012, plus ordinary shares and cash. The cash element was fixed and so was the number of ordinary shares attributed to participating security holders. The principal purpose was to improve the company’s financial position, creditworthiness and debt-to-equity ratio by reducing its outstanding debt.

Given the straightforward nature of the transaction, the company decided to rely solely on its legal counsel and agent to structure this deal. The company’s financial advisers were released as soon as the restructuring proposals were approved. Deutsche Bank as the agent took the leading role in ensuring that the transaction would work in the financial market where the company’s senior notes traded, together with the company’s legal counsel.

The agent determined that the notes traded in the ICSDs, negotiated the timings and the procedures with them, and assisted in the drafting of the relevant sections of the offering document. It liaised with the relevant stock exchange to coordinate its comments on the transaction documentation. It also provided local facilities where tendered securities could be presented over the counter in the country where the senior notes were listed. At the commencement of the transaction, the agent coordinated the distribution of the offer documents to the security holders and the clearing systems. During the offer period, it compiled the participating holders list and produced reports for the company, while at the same time acting as an information centre for the security holders that wished to participate in the transaction. Finally, on expiration of the offer, it confirmed the amount presented in the offer and calculated the security holders’ consideration. On settlement, it distributed the consideration – that is, new bonds, cash and ordinary shares – to the security holders, and arranged for the old securities presented in the debt exchange to be destroyed. The transaction had a 99.89 per cent success rate.

Case study 2 – natural resources supply company

In 2000, a natural resources supply company faced the most severe liquidity crisis in its history. This crisis was exacerbated by large payments on its debt falling due in 2000 and 2001, debt which the company was unable to repay due to its low level of cash reserves, the deteriorating state of the economy and the continued unavailability of fresh financing through the international capital markets. The company had no choice but to request its creditors to exchange existing debt for new debt with extended maturities.

The key objective of the debt exchange was to improve the repayment schedule and financial viability of the company, while offering security holders a financial package that was equitable, credible and sustainable.

In this more complex restructuring, Deutsche Bank as the agent had to provide support in multiple markets. The company’s debt was listed on the New York Stock Exchange, the Deutsche Börse and the Bourse de Luxembourg, and traded in Euroclear, Clearstream, DTC and the German CSD, Clearstream AG. This required the agent to provide processing centres in New York, Frankfurt and London. To add to the complexity of the deal, analysis showed that the securities were held by the retail market, which meant that co-leads and local brokers had to be engaged in order to facilitate the solicitation of such retail holders in the local markets. This also meant that incentives in the form of brokerage fees had to be offered, which the agent had to distribute at the end of the transaction.

The transaction eventually required a lead dealer manager and four co-leads. The agent provided the services described above from all three processing locations and coordinated the transaction management, review of documentation and reporting from its central location in London. When the transaction finished, the agent had processed approximately 18,000 requests for participation in the debt exchange, collected €2.8 billion of the company’s old debt from the market and issued a total of €2.3 billion of new bonds back to the participating security holders. During the offer period, the agent dealt daily with approximately 180 security holder queries and reconciled 230 participation instructions. The positive response of the company’s creditors resulted in the exchange of 99.2 per cent of its old debt for new debt, which improved its debt repayment profile.

What companies should look for in an agent

Given the high profile of a debt restructuring, a company needs to be confident that its transaction will be handled by experts and with total efficiency. It should therefore look for an agent with the following competencies.

Global reach

It is important when a company is planning the restructuring of a cross-border debt portfolio that it chooses an agent that has a presence in the relevant local markets and can provide on-the-ground support to local security holders wishing to participate in the offer. On some occasions, transactions need to be coordinated across territories in very divergent time zones and the agent must be able to provide 24-hour coverage and support.

International links

If the company is proposing a restructuring of bonds trading in separate markets, it needs to ensure that the agent engaged to facilitate the communication with the security holders has links to the appropriate clearing systems. For instance, the restructuring of debt trading in the international markets calls for a link in Euroclear and Clearstream, but for a restructuring occurring in a domestic market the agent needs to have access to that market’s clearing system – for instance DTC in the United States, Monte Titoli in Italy or Clearstream AG in Germany – and to be able to provide local market support. Having offices that could act as over-thecounter processing centres for definitive securities could be a necessity in certain markets. An agent should be prepared to provide those.


It is important when selecting an agent to review its credentials. Choosing one with a solid record of successful restructurings and public offers for wellestablished institutions is crucial. The greater the breadth of expertise the agent has, the more solutions it can offer to a company contemplating a debt restructuring.


In conclusion, every debt restructuring is different, and meticulous planning of the process is as important as the financial offer made to the security holders. If the company is to achieve the level of participation it requires in order to meet its objectives, security holders need to be able to access the appropriate information and communicate their intentions easily, which is the responsibility of the agent. Equally, the company’s reputation in the financial markets may be damaged if its restructuring is badly managed. Thus, the agent’s role is a key element in ensuring the success of the restructuring.

The views expressed in this article do not necessarily reflect those of Deutsche Bank AG or its group companies. Any similarities between the companies used in the examples and real businesses are purely coincidental.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.