News from the INSOL Europe Annual Congress in Brussels
In a packed break-out session – standing room only! – INSOL Europe’s Turnaround Wing (which I co-chair) discussed the Mexican stand-off: forcing consensual restructuring solutions on stakeholders. The oxymoronic phrase highlights the challenges of operating in the twilight zone between severe distress and formal insolvency.
The key points highlighted were:
- Whether the impact of insolvency is clear or, as in some jurisdictions, ill-defined, insolvency is a threat that promotes consensus through fear of the unknown or the unacceptable.
- Valuations bring clarity, but will be tempered by issues that can be identified in the legal documentation.
- Cultural effects may impact stakeholder negotiations, as always when working in the cross-border space.
- It is irresponsible of stakeholders to allow stalemate where the company will end up in free fall and liquidation.
- Management often has a key role to play in these negotiations.
A case we had at Mercer & Hole where these considerations applied was Odyssey Care. We dangled a local authority over the precipice of insolvency, forcing a consensual solution.
Date: 12th October, 2012
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