Corporate Restructuring : Lessons from Experience

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ISBN: 9780821359280 | 0821359282
Cover: Paperback
Copyright: 4/30/2005

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In the wake of the periodic financial crises of the late 1990s, the international financial institutions and many experts have recognized the need for a strategy to avoid and mitigate the severity of crises in the corporate sector. Addressing this problem requires the complementary efforts of policymakers, regulators, lawyers, insolvency experts, corporate restructuring specialists, and financiers.What are the roots of corporate distress? Can systemic corporate crises be predicted? What is the role of legal frameworks in preventing and coping with a crisis? What are the most effective financial techniques for dealing with distressed corporates? This timely volume takes a multidisciplinary perspective on corporate restructuring, and examines international experiences in dealing with corporate crises.

Preface

xix

Acknowledgments

xxi

Contributors

xxiii

Introduction: Toward Better Practices in Systemic Corporate Restructuring

xxxi

Michael Pomerleano

The Government's Role

xxxii

Monitoring

xxxii

Intervention

xxxiv

Legal Framework for Corporate Restructuring

xxxvii

Tax Issues

xxxix

Skills and Capacity

Financial Engineering: Financial and Operational Restructuring

xliii

Asset Management Companies

xliii

Alternatives to Asset Management Companies

xliv

Use of Financial Techniques

xlv

References

xlviii

Notes

xlix

Synopsis of Conference Papers

(10)

William Shaw

Overviews of the Crisis and General Principles

(3)

War Stories from the Crises

(1)

Technical Issues

(1)

Note

(4)

Part I: Overviews of the Crisis Experience

Policy Approaches to Corporate Restructuring around the World: What Worked, What Failed?

(48)

Stijn Claessens

Overview of Approaches

(30)

Government-Sponsored Voluntary Workout Schemes

(5)

Court-Supervised Restructuring and Bankruptcy

(5)

Restructuring by Public Asset Management Companies and State-Owned Banks

(8)

Voluntary Workouts outside Government-Sponsored and In-Court Frameworks

(3)

Supporting Policy Changes

(6)

Outcomes in Corporate Restructuring

(9)

Nonperforming Loans and Financial Indicators

(7)

Operational Restructuring Measures

(2)

Policy Lessons

(6)

An Efficient Insolvency System

(1)

Adequate Loss-Absorption Capacity

(1)

A Proper Framework of Incentives

(1)

A Limited Role for Banks and the State

(1)

A Menu of Approaches

(1)

Corporate Governance and Other Reforms

(1)

References

(1)

Notes

(2)

Recent International Experiences in the Use of Voluntary Workouts under Distressed Conditions

(40)

Ira Lieberman

Mario Gobbo

William P. Mako

Ruth L. Neyens

The London Approach

(4)

Corporate Restructuring in Korea

(11)

Initial Government Response

(1)

Policy Measures

(2)

Workout Program

(5)

Daewoo: ``Too Big to Fail?''

(1)

Special-Purpose Vehicles, Restructuring Funds, and M&A Transactions

(1)

Strengthening the Corporate Restructuring Process within the Banks

(1)

Corporate Restructuring in Turkey: The Istanbul Approach

(8)

Legal Framework and Structure

(2)

Implementation of the Istanbul Approach

(2)

Impediments

(3)

Corporate Restructuring in Mexico

(2)

Poland: Decentralized Workouts Pursuant to Privatization of State-Owned Banks

(4)

Lessons Learned

(3)

References

(2)

Notes

(4)

Emerging-Market and Crisis Applications for Out-of-Court Workouts: Lessons from East Asia, 1998--2001

(28)

William P. Mako

Corporate-Financial Sector Linkages

101

(3)

Recent Approaches to Out-of-Court Workouts

104

(3)

Korea

104

(1)

Malaysia

104

(1)

Thailand

105

(1)

Indonesia

106

(1)

Results

107

(3)

Easy Lessons

110

(4)

Principles and Processes

110

(1)

Legal and Regulatory Impediments

111

(2)

Capacity Constraints

113

(1)

Potential Deal Breakers

114

(5)

Debtor Losses

114

(1)

Creditor Losses

115

(2)

Inter-Creditor Differences

117

(2)

References

119

(1)

Notes

120

(7)

Are More Restructuring Regimes Becoming Like the U.S. Chapter 11 System?

127

(14)

James H. Zukin

Alan Fragen

Dorian Lowell

Chapter 11

128

(2)

Restructuring Regimes in Industrial Countries

130

(1)

Requirements of a Rapid-Sequencing Process in Developing Countries

131

(2)

The Merits of a Chapter 11 System for Countries

133

(2)

Conclusions

135

(1)

Appendix 5.1: Questions and Answers on the Current Sovereign Restructuring Process

136

(3)

Reference

139

(1)

Notes

139

(2)

The Successful Asset Management Companies

141

(30)

Ruth L. Neyens

Dato Zukri Samat

Beom Choi

Yang Kaisheng

Shinjiro Takagi

The Role and Progress of Danaharta, Malaysia, Dato Zukri Samat

142

(2)

Korea Asset Management Corporation: The Host of Restructuring Vehicles Tried in Korea, Beom Choi

144

(4)

China's Huarong Asset Management Company, Yang Kaisheng

148

(3)

China's Banking Reform

148

(1)

Asset Management Companies

149

(2)

Restructuring Approaches Used in Japan, Shinjiro Takagi

151

(10)

Improvements in the Legal Structure for Corporate Reorganizations

152

(2)

The Industrial Revitalization Corporation of Japan

154

(6)

Human Resources for Corporate Restructuring

160

(1)

Conclusions

161

(2)

Appendix 6.1: Civil Rehabilitation Proceeding in Japan

163

(1)

Appendix 6.2: Corporate Reorganization Proceeding in Japan

164

(2)

Appendix 6.3: Out-of-Court Workout in Japan

166

(2)

Notes

168

(3)

Progress toward the Resolution of Nonperforming Loans

171

(14)

Jack Rodman

The Resolution of Nonperforming Loans

172

(8)

Recommendations

180

(1)

References

181

(1)

Note

181

(4)

Part II: War Stories from the Crises

Restructuring in Weak Legal and Regulatory Jurisdictions: The Case of Indonesian Restructurings

185

(20)

Ray Davis

Successful Indonesian Restructurings

187

(1)

The Impediment of a Weak Court System

188

(1)

Effect of Weak Courts on the Rights of Secured Creditors

189

(1)

Strong Creditor Organization and Leadership

190

(4)

Cash Controls

194

(1)

Unexpected Effect of Laws Passed at the Time of the Crisis

195

(1)

Role of Government Interventions in Restructuring Negotiations

196

(1)

Foreign Government Intervention

196

(3)

Preserving the Value of the Enterprise

199

(1)

Complexity of Public Debt

199

(2)

Summary

201

(1)

Notes

201

(4)

Government Policy Responses in Korea

205

(4)

Hogen Oh

Note

208

(1)

Malaysia's Experience withCorporate Restructuring

209

(14)

Dato Zainal

Abidin Putih

Before the Crisis

209

(1)

Impact of the Crisis

210

(1)

Factors Contributing to the Crisis

211

(2)

The National Economic Recovery Plan

213

(1)

Banking Restructuring

214

(4)

Danaharta

215

(2)

Danamodal

217

(1)

Corporate Debt Restructuring Committee

218

(1)

Corporate Restructuring

218

(1)

Conclusions

219

(1)

References

220

(1)

Notes

221

(2)

An Alternative to Government Management Companies: The Mellon Approach

223

(6)

Richard H. Daniel

Corporate Restructuring Funds: The Lessons from Korea

229

(8)

Christopher Vale

Background

229

(1)

Corporate Restructuring Funds

230

(2)

The Investment Process

232

(1)

Positives and Negatives

233

(4)

Part III: Technical Issues

Debt and Firm Vulnerability

237

(24)

Jack Glen

Data Description

242

(7)

Regression Analysis

249

(7)

Constituent Components: Sales Margins and Turnover Effects

253

(1)

Country Effects

254

(2)

Conclusions

256

(1)

References

257

(1)

Notes

258

(3)

The Contingent Claims Approach to Corporate Vulnerability Analysis: Estimating Default Risk and Economywide Risk Transfer

261

(40)

Michael T. Gapen

Dale F. Gray

Cheng Hoon Lim

Yingbin Xiao

Contingent Claims Analysis

263

(6)

The Contingent Claims Methodology

264

(2)

Distance to Distress and Probability of Default

266

(1)

Moody's MfRisk Model: Contingent Claims Analysis in a Multisector Framework

267

(2)

Assessing Corporate Sector Vulnerabilities

269

(15)

The Brazilian Corporate Sector

269

(3)

The Contingent Claims Approach and Financial Market Uncertainty in Brazil in 2002

272

(6)

The Thai Corporate Sector

278

(3)

The Contingent Claims Approach and the Asian Financial Crisis

281

(3)

Multisector Contingent Claims Analysis

284

(6)

Multisector Contingent Claims Analysis: Brazil

285

(2)

Multisector Contingent Claims Approach: Thailand

287

(3)

Conclusions

290

(5)

Advantages of the Contingent Claims Approach

291

(2)

Hurdles to Overcome

293

(1)

Implications for Macroeconomic Risk Management

294

(1)

References

295

(2)

Notes

297

(4)

Developing an Effective Framework for Insolvency and Credit Rights

301

(30)

Gordon W. Johnson

The Role and Significance of Enforcement and Insolvency Systems

302

(1)

Meeting the Challenges of Business in a Global Market

302

(1)

Promoting Sound Investment Climates and Commercial Confidence

303

(1)

The Risk Assessment Continuum

303

(2)

The World Bank Principles and the Risk Assessment Continuum

305

(3)

The Commercial Insolvency Framework

306

(2)

Are the World Bank Principles Pro-Creditor or Pro-Debtor?

308

(1)

Experience with the World Bank Principles under the ROSC Framework

308

(3)

Creditor Rights Systems

309

(1)

Insolvency Systems

309

(1)

Rehabilitation and Reorganization of Businesses

309

(1)

Institutional and Regulatory Frameworks

310

(1)

Lessons and Experience in Applying the Principles

311

(1)

Corporate Restructuring: Common Implementation Goals

312

(4)

Corporate Rescue Approaches

312

(1)

Formal Proceedings

313

(1)

Comparative Tax Consequences for Debt Write-offs

314

(1)

Social Protection Systems

315

(1)

The Way Forward

316

(1)

Appendix 15.1: World Bank Principles and Guidelines for Effective Insolvency and Creditor Rights Systems

317

(12)

References

329

(1)

Notes

329

(2)

Appendix 1 Financial Restructuring: Techniques and Negotiating Dynamics

331

(48)

Alan D. Fragen

Debt-for-Debt Exchange

334

(16)

Situational Overview

334

(6)

Situational Assessment

340

(4)

The Negotiating Dynamics

344

(6)

Debt-for-Equity Exchange

350

(29)

The Negotiating Dynamics

368

(11)

References

379

(1)

Notes

379

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Corporate Restructuring : Lessons from Experience

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