Time is one of the most valuable resources during a workout. Many restructurings fail simply because the company runs out of time before the relevant information has been evaluated and negotiations are completed. The time available to the company before it runs out of cash, or the confidence of its customers and suppliers evaporates, needs to be assessed early in the restructuring and every attempt should be made to deliver a solution within that period. As soon as it becomes apparent this may not be achievable, banks need to explore ways of extending the time available.

Corporate distress situations are characterised by uncertainty and instability. The key contributor to the crisis tends to be a ‘liquidity crunch’, whereby the company experiences severe cash shortages. This constrains the company’s ability to carry on operating normally. An assessment of the company’s short-term liquidity position, and meeting the cash needs identified, is necessary if stability is to be attained, so that the loan workout can be transacted effectively.