The past couple of months cannot be described without discussions of the COVID-19 pandemic. End-Q1 marked a gradual slowdown and Q2 has seen a more aggressive decline. While capital markets are surging, economies are looking far less optimistic, especially for regions still undergoing strict lockdowns, such as India.
Businesses all over the world are adopting new strategies to overcome the critical situation at hand. One of the most important aspects of these businesses will be looking for means to maintain continuity in scrambling for cash during this liquidity crisis. In response to the catastrophic shock to the financial and economic systems, leaders from a swath of industries and sectors are looking to mitigate the unexpected financial pressures inflicted by the systematic economic fallout.
The number of bankruptcies and restructuring is now expected to rise in the coming months. It will be challenging for many businesses to fulfill their obligations to creditors given the precipitous drop in revenues that many experienced.
To respond to the interruption and changing market conditions, an option that short- and long-term financially distressed businesses can take is to restructure assets, operations, and capital structures internally or supervised by a court to keep the company solvent and steer the businesses back on track.
Restructuring is a complex and lengthy process. It involves many stakeholders with agendas debtors, secured and unsecured creditors, bondholders, committees, and potentially regulatory agencies and requires that these numerous constituents are all working from the same base of information. This can be challenging, even in normal times, but the COVID-19 crisis has introduced a whole new set of complexities that need to be navigated.
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