Corporate Restructuring: Lessons from Experience

Corporate Restructuring: Lessons from Experience

Corporate Restructuring: Lessons from Experience

Corporate Restructuring: Lessons from Experience

Synopsis

In the wake of the periodic financial crises of the late 1990s, the international financial institutions and many experts have recognized the need for a strategy to avoid and mitigate the severity of crises in the corporate sector. Addressing this problem requires the complementary efforts of policymakers, regulators, lawyers, insolvency experts, corporate restructuring specialists, and financiers. What are the roots of corporate distress? Can systemic corporate crises be predicted? What is the role of legal frameworks in preventing and coping with a crisis? What are the most effective financial techniques for dealing with distressed corporates? This timely volume takes a multidisciplinary perspective on corporate restructuring, and examines international experiences in dealing with corporate crises.

Excerpt

The severe financial crises that devastated emerging markets over the past decade underlined important gaps in our ability to deal with corporate distress. The Asian crisis, and ensuing crises in Turkey and Argentina, led to massive declines in output and corporate profitability and to widespread corporate insolvencies. Moreover, corporate difficulties are not limited to countries that have suffered a recent, spectacular crisis. In many countries, corporate weaknesses or “silent” distress may be setting the stage for future financial crises. There is no magic bullet for addressing systemic corporate distress. Coping with it requires a host of simultaneous measures, such as financial engineering techniques for restructuring, consideration of the impact of the tax system on incentives for restructuring, policy approaches to the disposal of bad debts, efforts to strengthen bankruptcy courts and the legal framework for insolvency, and the establishment of procedures for out-of-court workouts. It has become clear that governments, as well as the multilateral institutions, often lack the resources and expertise required to address corporate distress on a large scale and that policies, institutions, and legal frameworks may not be adequate to the task. A scarcity of skills (legal, financial) in the private sector and in the judiciary is also found to be an impediment in many countries.

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