Debt restructuring: methods, conduct. Restructuring of receivables

Debt restructuring is necessary when the company cannot service and fulfill its obligations. This situation arises for various reasons. Let us further consider why, how and by whom debt restructuring is carried out.

Key premises

Restructuring of enterprise debt is necessary if:

1. The decision to grant a loan to the company was initially made without a thorough financial and economic assessment and turned out to be unreasonable regarding the likely costs, level of implementation, qualifications of the management, necessary investments, and so on.
2. After taking a loan, events occurred in the company that negatively affected the business. This may be a decrease in demand, an increase in costs for the main production factors, the loss of large transactions and so on.

Possible remedies

Restructuring of obligations can be initiated by creditors, tax authorities, and the debtor himself. However, the company that provided the loan must decide which is best for her. She may try to return the funds issued by imposing a penalty on the property of the debtor or by initiating bankruptcy proceedings, or agree on loan restructuring. The terms and conditions for repayment of obligations can be changed at any stage: during or before a case is examined in court, as part of enforcement proceedings or insolvency proceedings.

Important Features

When deciding on a change in the terms and conditions of repayment of an obligation, two main factors should be considered:

1. Effectiveness of the legal procedure for loan repayment and bankruptcy.
2. Debtor company viability in perspective.

It should be understood that any changes in the terms and conditions of repayment will be beneficial for the financial institution only when the borrower's cash flows allow him to follow the new schedule. In this regard, the restructuring of accounts payable should be carried out after:

1. Leadership analysis.
2. Studying the influence of external factors on the activities of the borrower.
3. Financial analysis.
4. Evaluations of strategy and operational performance.

Based on the items listed above, it is performed:

1. Financial analysis forecasts. It will determine the probable amount of cash flows that the company may use in the future to service debt after the restructuring, as well as additional funds that it may need.
2. Valuation of collateral. It will allow you to establish a possible percentage of satisfaction of the requirements, if necessary bankruptcy proceedings or when selling collateral.

International practice

If a decision is made in favor of changing the terms and conditions of repayment of obligations, various points are taken into account. First of all, it takes into account the desire of the financial company to save the client, as well as the well-founded desire not to look like a "grave digger" in the eyes of business partners, the public and government agencies. Restructuring accounts payable is always the result of a compromise. It will depend on the strengths and weaknesses of the parties, the rational behavior of the participants. Thus, a large number of large banks with diverging interests impede negotiations.

International practice has developed a number of standards aimed at establishing uniform rules for all financial companies. Their observance allows us to prevent situations in which the behavior of one bank led to the collapse of the process and, consequently, to the death of the borrower's business. The restructuring of accounts payable on the example of British financial organizations (the "London approach") is considered indicative.

The leading British banks have developed a “code of conduct” for companies providing loans in case of large-scale corporate defaults. It contains a voluntary moratorium on the period of assessing the prospects and financial condition of the debtor, equal access to information subject to confidentiality, refusal to collect debt individually, taking into account the contractual capabilities of the parties, the formation of an informal credit committee, and so on.

Novation

The Civil Code of the Russian Federation provides for various methods of debt restructuring. These include, in particular:

1. Novation.
2. Cession.
3. Offset.
4. Debt transfer.
5. Securitization.
6. Retreat.

Novation is the replacement of an existing obligation with a new one between the same entities to terminate the former. Consider how the restructuring of accounts payable may look on the example of a company that performed a contract for 500,000 rubles. When the date came when the customer needed to pay, an agreement was concluded, according to which the organization undertakes to deliver a certain product for the service provided. Thus, the debt restructuring agreement includes information on the assortment, quality and quantity of products, the procedure and terms of delivery. Sanctions are also provided for non-fulfillment of the conditions. In this case, debt was restructured through novation.

Basic requirement

In the new obligation, the lender and the borrower must be the same as in the original. However, in some cases, participants in legal relations begin to create not entirely clear constructions. As a result, it can be very difficult to establish from what and how exactly a new commitment was formed. As a result, the contracts lack the necessary details, a description of the actual relationship and the grounds for the appearance of other terms of the transaction. If a dispute subsequently begins regarding novation, the trial of which will be carried out in court, the party that refers to the novation will have to prove the arguments presented. A confirmation may be a contract, correspondence of participants, payment documents, various acts that have been signed, and so on.

Novation Terms

Debt restructuring in this way requires the following:

1. In the newly created obligation, it is necessary to provide for a different method of performance or subject matter in comparison with the original.
2. There must be a causal relationship between innovation and the original arrangement.
3. The final and initial obligations must be valid. Otherwise, the rules regarding the invalidity of transactions may apply to the new arrangement. As a result, the novation will be declared invalid, and the participants, in turn, will be bound by the original obligation.
4. The newly created conditions shall terminate the additional clauses relating to the initial agreement, unless otherwise provided in the agreement. Such an obligation may be a forfeit, a deposit, a guarantee, a deduction of property or a pledge.

Cession

The restructuring of receivables by this method involves the transfer of the right to demand performance of an obligation from one entity to another. No borrower approval is required But if he is not notified in writing of the assignment procedure, then there is a risk of adverse consequences for the lender.If the borrower decides to carry out the assignment, he is obliged to notify the financial company in the manner prescribed by law.

The original creditor, who ceded the right, is liable to the new entity only for the invalidity of the transferred claim, and not for failure to fulfill the conditions of the obligated person. An exception is the case when the entity providing the loan assumes obligations to ensure the fulfillment of the conditions. He can become a guarantor or pledge his property. The right of the first creditor is transferred on the same terms and in the same volume in which it existed until the conclusion of the assignment agreement.

Obligation translation

This is the second way with which the restructuring of receivables associated with the change of entities is carried out. In this case, the main condition is the consent of the lender. Distinguish between preliminary and subsequent approval. The first is usually present in the original contract. It is presented in the form of permission to transfer obligations without the consent of the creditor. It can only be withdrawn before the signing of a new agreement. Subsequent consent cannot be taken back.

Securitization

Restructuring of accounts payable of an enterprise can be carried out by conversion into securities. The application of this option is advisable in the case when there is a greater number of disparate lenders. Issued securities may be stocks, bills and bonds. This debt restructuring has its advantages. One of the advantages is the potential liquidity of the issued securities. This means that they can be sold on the open market, albeit at a discount. At the same time, the liquidity of bonds of a relatively small company, especially in Russia and other countries with economies in transition, is difficult to estimate beforehand. Improving the attractiveness of bonds is achieved by providing collateral with certain property, providing guarantees and sureties of third parties.

Limitations

One of the main problems with securitization is setting the limit of a bonded loan. In Art. 33 of the Federal Law governing the activities of the joint-stock company, it was established that the nominal value of issued bonds cannot be higher than the size of the authorized capital or the amount of security provided by the company for the issue of securities by third parties. Placement without the last condition is allowed from the 3rd year of the company’s activity with proper approval by the time of 2 annual balances.

Ways to fulfill obligations by shares

AO can pay the debt by:

1. The issue of shares by placing them on the market independently and directing the funds received to the loan account.
2. The use of a mechanism similar to that provided for in Government Decree No. 254. This act explains the conditions and procedure for the restructuring of tax arrears. In this case, a certain deposit is provided. Restructuring of tax arrears involves the transfer of relevant agreements to an authorized body.

There is another option, according to which the company gives back the additionally issued shares to the lender, and he, in turn, counts them as payment. But, since this method directly contradicts the provision of Art. 99 (paragraph 2) of the Civil Code, which does not allow the shareholder to be exempted from the obligation to pay for securities, by offsetting the requirements for the joint-stock company in order to circumvent the ban, the company has to develop fairly complex options. Emission for securitization is associated with a fairly large number of problems. They relate to market overcrowding in illiquid stocks, difficulties in setting fair prices, and so on.

Offset

Debt restructuring in this way is advisable when mutual obligations are established between the companies. The possibility of repayment by offset is provided in the Civil Code. To carry out the procedure, a statement of one of the participants is required if:

1. Counter requirements. An entity under one obligation simultaneously acts as a creditor in another.
2. Uniformity of the subject. In this case, between the parties there should be no agreement on its change.
3. Opportunities to demand immediate execution or a fixed maturity date.

The Civil Code expressly provides for cases in which offsetting is not allowed. For example, it is prohibited when there is an obligation to pay for shares or to make a contribution to the authorized capital.

Contract agreement

This is a specific type of offset. In accordance with this agreement, the participants enter the requirements to the contract account (single) account. This is necessary so that the party that will be the debtor at its closure for the expired period becomes obligated to pay the difference. The balance can be entered into the account of the forthcoming period in the first line. A more complex type of contract account is a clearing transaction. More than two people can participate in it.

Controversial issues

Particular care must be taken when offsetting with an organization facing bankruptcy. In some cases, restructuring may be construed as the preferred option for meeting requirements. In the process of offsetting, some entities put forward their requirements to reduce the sanctions that are accrued on delay in violation of the terms for fulfilling the terms of the contract.

For example, participants agreed on the repayment of part of the debt by offset. Along with this, the obligated person declares that the funds will be used to pay the main loan, and he will transfer interest later. This condition is illegal. By such actions, the debtor infringes upon the interests of the creditor. The latter will no longer be able to demand the payment of a penalty, penalty or penalty for delay. In this regard, the participants often have disagreements, since the law relating to the partial set-off of the claim is not directly regulated by the law.