Debt Restructuring & Workouts

Informal Workouts & Forbearance Arrangements

Informal workouts are often the most cost-effective and efficient way to address financial difficulty, allowing borrowers and lenders to agree on revised arrangements that enable the borrower to trade through its difficulties while providing the lender with a better outcome than enforcement or formal insolvency. We advise both borrowers and lenders on the full range of informal workout options and assist in negotiating and documenting workout arrangements. For borrowers, we advise on the preparation of restructuring proposals for presentation to lenders, negotiation of forbearance arrangements and standstill periods, variation of loan terms, and implementation of asset sales and deleveraging strategies. Our advice to lenders includes assessment of the borrower's financial position, evaluation of proposed workout plans, negotiation of forbearance terms, and documentation of workout arrangements including deeds of forbearance and amendment agreements.

Directors' Duties & Safe Harbour Protections

When a company faces financial difficulty, the directors' legal obligations become increasingly complex and the consequences of failing to meet those obligations can be severe. We advise directors on their duties when their company is in financial difficulty, including the duty to prevent insolvent trading under section 588G of the Corporations Act, the duty to act in good faith and with due care and diligence, and the duty to consider the interests of creditors when the company is insolvent. We provide practical advice on the steps directors can take to discharge their obligations, including preparation of a safe harbour plan under section 588GA of the Corporations Act, engagement of a suitably qualified turnaround professional, preparation of financial projections, and maintenance of proper financial records.

Formal Restructuring & Debt Restructure Documentation

Where informal workouts are not sufficient to address a company's financial difficulties, formal restructuring may be necessary. Our formal restructuring practice includes the negotiation and documentation of comprehensive debt restructure transactions, debt-for-equity swaps, and other formal arrangements. Our restructuring agreements typically include revised repayment schedules, amended financial covenants, additional security arrangements, and provisions for equity conversion or asset sales. We manage the documentation process for complex restructures involving multiple facilities, multiple lenders, and multiple levels of debt. For debt-for-equity swaps, we advise on valuation of debt and equity, allocation of equity among lenders, corporate and regulatory requirements for issuing equity, and tax implications of the swap.

Lender Strategies, Enforcement & Formal Insolvency

When borrowers are unable to meet their obligations despite restructuring efforts, lenders may need to consider enforcement of security or formal insolvency processes. Our enforcement advice covers enforcement of security under general security deeds, mortgages, and other security arrangements, including appointment of receivers and controllers. Our formal insolvency advice covers voluntary administration, deeds of company arrangement, and liquidation. We advise on recovery actions including unfair preference claims, uncommercial transaction claims, and claims against directors for insolvent trading. For lenders, we provide advice on lodging proofs of debt, voting at meetings of creditors, participation in committees of inspection, and negotiation of deeds of company arrangement.

Debt Restructuring & Workouts FAQs (Queensland Law)