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Distressed Workout Solutions

When circumstances create difficult financial situations with lenders, GCC can help

Sometimes when borrowing you can find yourself in a difficult or uncertain financial situation, taking swift decisive action and partnering with professionals who understand the depth and breadth of the finance market can significantly help clients navigate out of troubled waters.

Global Capital Commercial (GCC) should be your first port of call in times of difficulty. Our range of services for distressed / workout situations including:

  • Creditor Negotiations
  • Debt Restructure
  • Incomplete Construction
  • Facility Renegotiation and Discount Negotiation
  • Corporate reconstruction strategies
  • Workout strategies
  • Divestment strategies
  • Credit enhancement strategies
  • Property finance (specifically private non-bank lenders)
  • Property Development Finance (for cases where the project is incomplete or there are cost overruns beyond the scope of the existing lender)
  • Equipment Finance (including direct access to private non-bank lenders)
  • Cash Flow & Debtor Finance
  • Inventory Finance
  • Trade Finance
  • Equity Investors
  • Venture Capital for turnaround solutions

At GCC, we have unparalleled access to market participants, meaning that often we deliver clients success and security where most others fail.
For borrowers, there are various levels of distressed situations, which can be very broadly categorised from low to high level.

Low Level

In these situations, typically an event has occurred which allows the funder to call up the loan and request repayment in full, or to refuse to roll over an existing facility. There can be many reasons for this, such as:

  • The bank has appointed a new relationship manager who does not understand or support the borrower’s business or project
  • A breach of monetary or non-monetary covenants (i.e. valuation short) has occurred
  • Short-term cash flow problems have meant the borrower has missed payments

At GCC, we consider the above examples as examples of low-level distressed situations, but the relationship with the existing lender has run its course and it is time to refinance. We recommend that refinancing at this early stage is often a client’s best option.

Typical strategy:

1. Refinance to a more understanding lender (typically a private lender)
2. Increase borrowing amount to cover cash flow needs, or restructure to allow for growth needs
3. Clean up loan repayment history to ensure credit history is back to acceptable levels
4. Refinance with a major bank in 6-12 months

Mid-Level – Mortgagee in Possession

In this situation, the borrower has failed to make repayments and the mortgage is in default. The lender can exercise their right to re-possess the property and sell it to recoup the amount owed. This situation is not ideal for the borrower, as the lender’s primary focus is on getting their money back, and mortgagee sales often result in lower sale prices. For the borrower, it is vital to move quickly, as default interest and legal fees can mount up very quickly.

Typical strategy:/h2>

  • Refinance to a more understanding lender (typically a private lender)
  • Increase borrowing amount to cover required cash flow
  • Clean up loan repayment history to ensure credit history is back to acceptable levels, with a view to refinance back to a major bank in 6-12 months, or
  • Allow for an orderly sale
High Level – Receiver Appointed

When a receiver is appointed, refinancing is not an option, as the client has already lost control of the assets and typically, also the borrowing entity. Our strategy is generally to negotiate with the receiver and acquire the debt from the lender at a negotiated discount, to retire the receiver. When this process is complete, refinancing and restructuring is an option, generally through a private funder.

  • Negotiate a payout figure at a discount to the current debt
  • Acquire [assign] the debt from the existing lender, including all rights associated with the senior position
  • Retire the receiver
  • Implement corporate restructure strategies
  • Implement credit enhancement strategies (as required)
  • Restructure debt to also include non-property-based facilities such as cash flow, equipment and trade finance (if required)
  • Refinance core debt, sale of any non-core assets (if required, to bring the debt back to a workable level)
  • Ensure new structure is acceptable and refinance back to a major bank once a clear 12-month trading history has been established
Move Quickly to Minimise Distress

If you are in any financial distress with your current facility and need assistance with a workout strategy, do not delay in addressing the situation. Contact GCC today so that together we can discuss your options and take the most appropriate steps – fast.

To see some of our innovative distressed workout solutions
in action click here

Damian McCormack, Broker

I engaged GCC to assist my client with obtaining development finance for 8 townhouses as none of the major banks were able to assist. GCC obtained approval consistent with the clients’ requirements (specifically no pre-sales) in a timely and professional manner. The approval was a big relief for the client as this project could release Continue Reading

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